The fraud squad are linking five websites trading under the names Fleetwood Holiday Ltd or Sun Orient Ltd, based in Islington, north London.
A woman in her 30s was arrested at a residential address in London.
Detectives made a second arrest at a residential address in the city and detained a man in his 60s. Both are being held at a London police station.
Lost money
About 100 complaints have been received locally, but police have said thousands nationally may have lost money.
The government's consumer advice service Consumer Direct has been flooded with calls.
Islington Trading Standards had taken 70 calls by Wednesday, but across England it is thought thousands of people's holidays may be in jeopardy.
It is believed the companies are being registered and run for a short length of time only to be replaced by newly named companies when the company stops trading in order for the fraud to be continued.
The five websites being investigated are:
Some customers have emailed the Holiday Watchdog website to report losses of up to £1,545 each.
One woman said she had booked her honeymoon through the Unbeatable Holidays website, only to hear on her wedding day it had been cancelled.
She wrote: "How do these people sleep at night? The best day of our lives was followed very quickly with nothing but tears."
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