The arrest followed a week-long investigation by Tokyo prosecutors into allegations of financial fraud and stock-price manipulation by the internet and financial services company, which sparked chaos in Japan's stock markets on Wednesday.
Once worth more than $6bn (£3.4bn), Livedoor has lost two-thirds of its share value since investigators raided its offices on Monday last week. Many observers believe the company will be broken up or go bankrupt.
The stock exchange added to the company's woes yesterday by announcing it was putting Livedoor and its subsidiary Livedoor Marketing on monitoring status, often a prelude to delisting. It said the company had so far failed to clear up suspicions that it had deceived investors.
Prosecutors waited until the end of trading before taking Mr Horie into custody. Three other executives, including the company's financial chief Ryoji Miyauchi, who was questioned at the end of last week, were also arrested.
Mr Miyauchi is believed to have testified that his boss did not know the details of a Livedoor takeover deal involving a publishing firm that it apparently already owned. The company is accused of using the deal to inflate the stock price of the publisher and of concealing losses from investors.
Mr Horie, who rose to rapid fame after a series of bold deals that shocked the grey Japanese business world, repeatedly denied the allegations in a blog he wrote each day from his besieged office in central Tokyo, saying he had "no recollection" of any of the allegations.
On Sunday he filed a rambling letter to his thousands of fans, accusing the press of orchestrating the campaign against him. He wrote: "Anything is possible in the mass media, isn't it... There are so many fabricated articles, I cannot be bothered to counter-argue... I am being accused of something I didn't do."
The old guard of Japan's business world added to Mr Horie's misery yesterday with a series of interviews attacking what one commentator called his "get rich quick" schemes. The head of Japan's biggest business lobby, Hiroshi Okuda, said such an approach "lacks morality and ethics". With charges yet to be filed, nobody is completely writing off a man who at 33 had built one of the most successful new companies in the country, but few are willing to bet Mr Horie will bounce back. The wait is now on to see whether he was one rotten apple in Japan's new economy or whether he is the harbinger of problems to come.
The Prime Minister Junichiro Koizumi has been forced to defend accusations that the neo-liberal policies he has championed since coming to office in 2001 may have created the conditions for more Livedoors. "Any illegal acts must be handled harshly," Mr Koizumi said.
I got up late this morning since I was having a meeting, checking e-mails as well as conducting business until late last night. I suddenly received a flood of phone calls... There are so many fabricated articles, I cannot be bothered to counter-argue... I am being accused of something I didn't do... I cannot clearly comment on the allegations that have been broadcast because I don't know if they are trustworthy as I have no idea who found out about them, or how or where he found them. This is my current situation.Reuse content