With his bid to win the presidency now all but dead, Annan becomes the latest presidential hopeful to be driven out of the race in an election virtually certain to be won by another graduate of Egypt's powerful military establishment, President Abdel-Fattah el-Sissi.
A security official with first-hand knowledge of the Annan affair said the ex-general was arrested by the military simultaneously with the release to the official media of an armed forces' statement listing the allegations facing him.
His arrest was reported by two top aides. One, Mustapha al-Shall, who broke the news to The Associated Press but had no details. Another one, Mahmoud Refaat, reported the arrest on his Twitter account, but again gave no details.
With Annan out of the race and possibly facing a court martial, only one serious presidential hopeful is left in the field: Prominent rights lawyer Khaled Ali, whose own candidacy could be at risk if his September conviction of making an obscene hand gesture in public is upheld on appeal, rendering him ineligible.
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The election is scheduled for March 26-28, with runoffs the following month, if needed.
The move by the military did not come as a complete surprise given that the powerful military establishment would have loathed seeing two of its graduates slug it out in an election contest, regardless of the overwhelming odds in favour of el-Sissi.
Two other presidential hopefuls have been forced to quit the race.
Another one is former lawmaker Mohammed Anwar Sadat. He said he quit the race partially because he feared for the safety of his supporters. Sadat is a nephew of Egypt's late leader Anwar Sadat.