The son of well-known Bulgarian businessman Grisha Ganchev has been arrested in a special police operation tackling VAT fraud in the production of sugar, according to unconfirmed information.

Ganchev is the owner of the Litex FC and the Litex company, based in the northern Bulgarian city of Lovech. As of the end of 2011, Ganchev's joint venture with the Chinese company Great Wall Motors, Litex Motors, started the production of Chinese cars for the EU market in the Litex Motors factory near Bulgaria's Lovech, in the village of Bahovitsa.

On Thursday, officers of the Bulgarian Unit for Combating Organized Crime GDBOP and the National Revenue Agency busted what is said to be organized crime group that incurred hundreds of millions worth of BGN to the state budget, according to the Interior Ministry.

Initial reports state that the VAT fraud scheme was invented by the CEO of a commercial company selling large quantities of sugar to retailers.

The sugar is provided from a joint venture in charge of the Bulgarian sugar production plants in Burgas and Devnya.

The suppliers provided only invoices only for a small faction of the total deliveries, which are worth between BGN 40 000 and BGN 130 000 daily. They used a bankrupt firm plus a chain of "missing traders" in order to commit fraud with the value-added tax.

According to the Bulgarian police, the organized crime group dealing with the sugar VAT fraud scheme also planned to import a test quantity of 25 tonnes of sugar containing toxic elements from the region of the town of Chernobyl in Ukraine, the home of the busted nuclear power plant.

In the event that it could be sold successfully in Bulgaria, the group planned to set up permanent imports of toxic sugar.

Bulgaria's police have arrested five persons as part of the sugar VAT fraud ring, with further inspections and searches continuing in the town of Devnya and the Danube city of Ruse.