According to the sources, Zahoor Ahmad Watali was arrested in the evening hours today.
The National Investigation Agency (NIA) yesterday carried out raids across 12 locations in Srinagar and parts of North Kashmir in connection with the terror funding case.
Watali was questioned by the agency sleuths while the raids went on for hours.
Watali, a Srinagar businessman, has been under the NIA scanner for nearly two months and has been called for repeated questioning at the agency's Delhi headquarters.
A source in the NIA said that "Watali has been summoned at least 25 times.