Metropolitan Police are investigating a scam that affected 3,000 holidaymakers and is believed to have netted fraudsters over £2 million.
Two arrests were made over the weekend.
The scam first came to light after concerned holidaymakers put warnings on the online travel forum of TripAdvisor.
More than 340 postings on the subject are listed on the TripAdvisor Benidorm forum.
The holiday firm was not ABTA or ATOL bonded, which means the fraud victims will not be paid compensation.
The scam is reported to have involved a business trading under several different names.
ABTA chief executive Mark Tanzer said the association was able to provide police with evidence that should help in pursuing a successful prosecution.
Anyone who is concerned can get further information from the Metropolitan Police website www.metpolice.uk/fraudalert or the Trading Standards Office in Islington, London.
By Bev Fearis
