KIEV, Ukraine—Russian authorities have detained an American citizen who runs the country’s largest independent private investment firm in an alarming signal to foreign investors that they are not safe to operate in Russia.

Michael John Calvey’s arrest follows the seizure of fellow U.S. citizen Paul Whelan, who was arrested for spying and faces 20 years in prison. Calvey denied guilt.

Calvey, the founder of Baring Vostok, which says it has committed capital of over $3.7 billion, was arrested along with six of his business partners on Thursday. Western executives operating at the top of the Russian business world are rare, but Calvey was known as a “good American” who was always loyal to Moscow.

Calvey speaks fluent Russian and has often told journalists and friends that he was “emotionally attached” to Russia. He claimed that Western journalists are often biased against Russian authorities, not talking enough about the improvements the country had achieved since the thuggish 1990s.

“We are very much alike, Russian and American people, we share the same feelings, we believe that everything is possible,” Calvey once said in an interview for his good friend Oleg Tinkov, a well-known Russian entrepreneur.

He does, however, serve as a director of the advisory board at the Atlantic Council, an American think tank that has been critical of Vladimir Putin’s Russia.

After being taken into custody, the investor is said to be suspected of embezzling $37 million from Russia’s Vostochny Bank. If he is charged, he would be facing up to 10 years in prison.

Unlike U.S.-born investor Bill Browder, who invested in state Russian companies and whose Hermitage Capital investment firm was raided back in 2007, Calvey has focused his investments on private companies.

Browder said the latest arrest would be damaging for the Russian economy. “The arrest of Mike Calvey in Moscow should be the final straw; Russia is an entirely corrupt and uninvestable country. Of all the people I knew in Moscow, Mike played by their rules, kept his head down and never criticized the government,” he said on Twitter.

Gennady Gudkov, an opposition leader, agreed that this would be a heavy blow to an economy in need of inward investment. “Billions of dollars run out of Russia every month and looking at what they are doing to Calvey, nobody would want to invest in our country,” he told The Daily Beast.

A spokesman at Basmanny Court, which is famous for trials against billionaire Mikhail Khodorkovsky, punk band Pussy Riot, and Browder’s lawyer, Sergei Magnitsky, said Calvey was suspected of “large-scale fraud.”

Baring Vostok released a statement saying that the arrest of four of its employees—three others did not work for the bank—concerns the firm’s dispute with Vostochny Bank, also known as Orient Express Bank, a Russian bank focusing on the Siberian and Far Eastern markets.

Even before Calvey’s arrest, Russia’s private sector has seen capital outflow increasing, dramatically: $31.3 billion fled Russia in 2017 and in 2018 the capital outflow increased to $67.5 billion. Economists urged the Kremlin to pay attention to the figures, predicting that the capital outflow of $10.4 billion in January this year would unavoidably be reflected in Russian salaries and pensions. “I am not sure if Calvey is guilty or not, but I am pretty sure that the Kremlin is not thinking enough of the country’s future,” Gudkov added. “If they did, they would have realized that Calvey’s arrest would scare all Western investors away.”

Before coming to Russia in 1994, Calvey worked at the European Bank for Reconstruction and Development and at Salomon Brothers in New York.

He is extremely well connected in Russian business circles. Two decades ago, his company was one of the first to invest in Russian giants like PJSC VimpelCom, a telecommunications company; Yandex technology company; Caspian Gas Corp.; and dozens of other successful Russian business enterprises.