A prominent city-based businessman Bhagya Kalita had earlier this month informed the police that he received SMSes from one person claiming to be an ULFA cadre and demanding Rs one crore.
After investigation, Jyoti Bhuyan was picked up yesterday, the police said today.
Another accomplice of Bhuyan is still at large.
Police said the accused has been involved in similar incident earlier also and used the name of ULFA to extort money. None of the two accused are associated with the militant outfit.
Efforts are on to trace the other accused, whose name is yet to be revealed.