A businessman, once hired to help look for Madeleine McCann, who is wanted by US authorities over an alleged fraud has been arrested at a hotel in Oxford, according to sources.

Kevin Halligen, 48, was arrested at the Old Bank Hotel in Oxford, following a discrepancy over his hotel bill and is in custody in the county, it is understood.

The US Department of Justice issued an indictment for the Briton two weeks ago alleging he tried to defraud a London law firm of more than two million dollars (£1.2m).

His firm, Oakley International, was used by Madeleine's parents Kate and Gerry for around six months last year to look for their missing daughter.

Thames Valley Police said in a statement: "We arrested a 48-year-old man at the Old Bank Hotel in Oxford. It was a discrepancy over his hotel bill."

Earlier this month the US Department of Justice issued an indictment for Halligen, who is from Surrey, alleging he conned a London-based law firm out of 2.1m US dollars.

It is alleged he claimed the money was to help secure the release of two business executives from the Dutch company Trafigura, who were arrested in the Ivory Coast.

Halligen is accused of using the funds for his own benefit including buying a mansion in Virginia.

Washington-based Oakley International was paid around £300,000 by backers of Madeleine McCann's parents to help look for the child after she went missing from an Algarve resort in May 2007. The six-month contract saw the firm hire other private detectives, set up a hotline and process information, but was not renewed.

A spokesman for the McCann family said: "Our association with Halligen and Oakley International ended well over a year ago. Given that an arrest has been made it would be inappropriate for us to comment."