Mark Bayliss, 20, from Cheshunt, Herts was found despite a note demanding £10,400 being sent to his grandmother on Tuesday.
Police had imposed a news blackout to protect his safety.
It meant there was no reporting of the case while officers from Hertfordshire Police and the National Crime Squad investigated.
Arrest
On Thursday afternoon they confirmed that Mark had been found and that a 20-year-old man from Cheshunt had been arrested.
He was being questioned about an attempt to obtain money by deception.
Police would not confirm whether the man was Mark Bayliss.
It is thought that a ransom note was delivered to Mark's 70-year-old grandmother, Judith Baker, at her home in Much Hadham, Hertfordshire, on Tuesday morning.
The type-written note, which suggested Mark had been taken as the result of an unpaid debt, is believed to have been accompanied by photographs showing him apparently bound and gagged.
It demanded that the money be paid into a bank account by 5pm on Monday, or Mark would not be seen again.
Mark, thought to be a barman, had recently left the family home and moved to a rented flat in Cheshunt following disputes with his parents over his lifestyle.
Parents and police thank media
Michael Bayliss, 54, Mark's father, who is a sergeant in the Metropolitan Police, expressed relief that his son had been found.
Mr Bayliss said: "We are, of course, pleased that Mark has been found and appears to be safe and well. The last three days have been very difficult for all of us but we have coped with the support of friends, neighbours and work colleagues.
"We have tried to behave as we normally would, for example, going to work, but it has been a strain.
"Now we are looking forward to getting on with our lives."
Hertfordshire's Assistant Chief Constable Peter Maddison also thanked the media for helping bring the inquiry to a successful conclusion.
Mr Maddison said in a statement: "Following an inquiry which started on Tuesday with a report of an allegation of kidnap, a 20-year-old Cheshunt man has been arrested in Bengeo, near Hertford, at 2.20pm today.
"He was arrested for attempting to obtain money by deception, and our inquiries are ongoing."
Mr Maddison added: "The media played a vital role by agreeing a news blackout for which we are very grateful. The media's support enabled us to bring this matter to a safe and successful conclusion."
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