Shares in Betex, the Aim-listed Chinese lottery scratchcard and gaming software operator were suspended this afternoon after two of its senior staff were arrested by Chinese police and a third appeared to be on the run.

In a statement, the company, founded by entrepreneur Johnny Hon who has an 18 per cent stake, and run by former banker Peter Greenhill, said it had suspended sales of its major software product across China. The product relates to a service provided for China's daily national lottery draw, according to a spokeswoman who was unable to give further details.

Betex added: "The Company has received information that two of the senior staff at its Beijing operation have been detained and that a further senior staff member is being sought by the Chinese police authorities in the province of Jilin."

The company said it was working with its legal advisers to try to obtain more information and was assisting the authorities wherever possible.

Betex said it believed the alleged illegal activity "relates to conduct by these individuals and does not call into question the legality of the Company's software product, or the conduct of the Company."

It added: "Owing to the uncertainty surrounding the situation, and the significance of these operations to the financial performance of the Company, the Company has requested a temporary suspension of trading in its shares on AIM pending clarification of the situation."

Betex's business is almost entirely dependent on the Chinese market. Its shares have collapsed from a high of 80p shortly after flotation a year ago, hit by fears over a clampdown on online gambling. They were suspended at 32.5p.

At the end of last year it unveiled a plan to begin selling lottery scratchcards in partnership with lottery authorities in Hebei province.

Scratchcards in China were a huge hit before being withdrawn during the 1990s after concerns over fraud.

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