Khairuddin Abu Hassan was arrested by police Friday after he was stopped from leaving for the United States where he was to meet with FBI officials, his lawyer Matthias Chang said.
He has been charged with plotting to "undermine parliamentary democracy", a vague charge that critics have said is open to government abuse.
"They want to stop him travelling and maybe to intimidate him," Chang said.
Najib's government has moved to quash further scrutiny of the revelation in July that nearly USD 700 million was deposited into his personal bank accounts.
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The government has called the money "political donations" from Middle Eastern sources but refuses to give more details.
Najib subsequently sacked his attorney general and deputy prime minister and made other personnel moves that appear to have stalled investigations.
Khairuddin, a former division head in the ruling United Malays National Organisation (UMNO), has demanded transparency over the Najib funds as well as at state investment company 1MDB, which Najib launched.
With no progress seen in Malaysian investigations, Khairuddin has recently travelled to Switzerland, Britain, France, and Hong Kong to highlight the case to authorities, Chang said.
Various foreign investigations have been launched.
A magistrate today ordered Khairuddin held for a week for investigations, Chang said.
The scandals have deeply tarnished Najib, a self-proclaimed reformer. He dismisses them as a conspiracy to unseat him.
Last month, tens of thousands of protesters paralysed Kuala Lumpur with a two-day demonstration to demand Najib's resignation and reform of Malaysia's 58-year-old regime whose critics accuse it of repression, corruption and electoral chicanery to stay in power.