News of the investigation by prosecutors based in Ivrea, home of Olivetti's headquarters, sent its shares plunging to a new low and forced Italian stock market regulators to suspend dealings for the third time in a fortnight.
By the time the shares were suspended they had fallen by 10 per cent to 516 lire. Two attempts to lift the suspension and resume trading in the shares failed.
The market was also unnerved by Olivetti's abrupt cancellation of planned meetings between Mr Caio and investors in Milan and London to reassure them of the company's future and financial position.
Between 30 and 40 per cent of the shares are held in London by institutional investors who took part in a pounds 913m rescue rights issue by Olivetti last December.
Olivetti said that the meetings would now take place at the end of September when it formally publishes its first half results.
But the markets were unimpressed. "Watching Olivetti is like watching Dallas," said one Italian equity trader. "Every day there is a new sorry episode."
Mr Caio, who took over the running of the company after the resignation of its long-standing chairman Carlo De Benedetti, was added to the list of executives being investigated by two Italian judges who are examining whether the first-half accounts, showing losses of 440bn lire were falsified.
The crisis erupted when Renzo Francesconi quit as chief financial officier of Olivetti three weeks ago alleging that the extent of the group's losses had been disguised. He had only been at Olivetti for six weeks.
The Italian stock market watchdog, Consob, promptly launched an investigation and it is still unclear whether company has answered all its questions.
Mr Francesconi was interviewed by the prosecutors for nine hours last week.
He has stuck by his claims even though Olivetti has threatened legal action against him.
The criminal investigation is just one of several inquiries facing Olivetti.
It has been called before the Italian industry ministry and last week Mr Caio faced questioning by the industry committee of Italy's lower house, the senate.