NEUCHATEL, Switzerland - Stricken Swiss side Neuchatel Xamax slipped from crisis into shame and near-oblivion Thursday, as its Chechen owner was arrested hours after declaring the club bankrupt.

Bulat Chagaev was detained by authorities in Geneva, who had been investigating him for suspected fraud, to prevent "financial mismanagement."

Hours earlier, Xamax said it would file for bankruptcy, then was formally declared bankrupt by a court in the state (canton) of Neuchatel.

The two-time Swiss champion, whose honorary president is Sepp Blatter, will drop out of the Swiss Super League midseason.

Blatter has no formal links to the disgraced current management, though a longtime friend and adviser of the FIFA president is leading a prospective ownership group which wants to revive Neuchatel Xamax's name next season as a fourth-tier amateur team.

Xamax's season of turmoil on and off the field entered a terminal phase last week when the Swiss League revoked its license because of suspected fraud and a failure to prove it could meet its financial obligations. Its debts are estimated at between 8 and 10 million Swiss francs ($8.7-10.9 million).

Chagaev's arrest was requested by prosecutors in Geneva, where his trading company has an office.

"His provisional arrest was ordered after a hearing held this afternoon. Another hearing is already scheduled for (Friday)," Geneva authorities said in a statement.

Xamax accepted its increasingly inevitable demise in a brief statement on its website.

"The board of directors of Neuchatel Xamax has decided today to file for bankruptcy, because of the withdrawal of its license and the financial position of the company," the statement said. "The board also decided to immediately release the players from their obligations to the business."

The club had launched an appeal Monday to regain its license to play matches, claiming that the league's disciplinary commission acted beyond its powers. Xamax's prospects dimmed Wednesday when it failed in two attempts to receive court injunctions against the league.

The club was scheduled to face a bankruptcy hearing in Neuchatel on Friday, forced by a creditor who also tried in November to bring the club down.

It was at that hearing that Chagaev's legal team submitted an alleged fraudulent Bank of America letter which purported to prove he had $35 million in a New York account.

Prosecutors in Neuchatel and Geneva are investigating the suspected fraud.

Xamax was scheduled to resume its league program after the winter break on Saturday Feb. 4 at home to Lausanne Sport. It was fourth in the 10-team top division though was likely to drop to ninth having appealed against points deductions imposed by the league for failing to pay salaries and breaking administrative rules.

Xamax coach Victor Munoz and a reduced squad of players returned this week from a training camp in Dubai unsure about their futures.

Munoz, a former Barcelona and Spain midfielder, previously coached Chechen club Terek Grozny, which plays in Russia's top division. Terek Grozny's chairman is Ramzan Kadyrov, a football fanatic and president of the Chechen republic.

Chagaev formally took control of Xamax last May, and arrived claiming that Kadyrov was "like a brother" to him.

However, Chagaev was reported to have fallen out of favour with Kadyrov as Xamax descended into turmoil with a succession of sporting directors, coaches and players fired.

Xamax is the first Swiss top-tier club to drop out midseason since Servette collapsed with debts in 2005.

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