Xu Xiang, known in China as "Hedge Fund Brother No 1" and three managers from Citic Securities have been formally arrested on insider trading charges.
The arrests were reported by Xinhua News Agency on Friday.
Xu, head of Shanghai-based Zexi Investment Management, was detained on Nov 1 during investigations into stock trading after a market rout in which China's A-share market lost $5 trillion in value between June and August.
Police froze more than $670 million of shares owned by Xu's mother in November after authorities started investigations into Zexi Investment, Xu's private equity company.
Zexi Investment managed four of China's top 10-performing hedge funds between June and August.
The average return of Zexi's five stock funds has ranked among China's top three every year since the firm was established five years ago, and yielded 249 percent between January and September, according to Shenzhen Rongzhi Investment Consultant Co.
In comparison, the benchmark Shanghai Composite Index advanced by only 2.8 percent last year after the summer market turmoil, and Chinese hedge funds reduced 16.4 percent of their holdings in listed companies, according to WIND Information Technology.
Xinhua said on Friday that Xu was charged with stock market manipulation and insider trading, without giving further details. Authorities and police are still investigating the case, the report said.
A listed company, whose shareholders included Zexi, said in March it had been contacted by police in Qingdao, Shandong province, at the time.
A Beijing Morning Post report said Xu was under detention in Qingdao, and is likely to stand trial in the city.
Cheng Boming, general manager of Citic Securities, one of China's largest brokerages, and two other managers, Liu Jun and Xu Jun, were arrested on similar charges, the report said.
Last year, China's securities market regulator and police launched investigations into several enterprises, brokerages, individuals and officials.
They are being probed for alleged involvement in insider trading, manipulating stock prices, malicious short-selling, forcing up or dragging down share prices through margin trading with accounts registered under false information, and other illegal actions.
