It’s not the first time Patisserie Valerie has been hit by a bomb: during the second world war the original cafe in London’s Soho was wrecked by the Luftwaffe. But Madame Valerie, a Belgian who started the cafe in the 1920s, simply picked herself up and opened a new shop nearby.

This time the business has been struck by a bombshell of the financial variety, but the damage has been no less serious. On Monday, Patisserie Valerie was a stock-market darling worth £450m. By Tuesday night the management team was racing to raise cash after the discovery of a gaping black hole in its accounts. Come Thursday night, finance director Chris Marsh had been arrested and bailed, and on Friday its famous chairman, business guru Luke Johnson, was shaking out his pockets to find £20m and keep the plates spinning.

A rescue plan has been cobbled together, with another £15m raised from City investors – but there is still no guarantee that the full scale of the problems at the 206-branch chain, which employs nearly 3,000 staff, has been uncovered.

“I don’t believe it,” said Marcio, a Portuguese waiter frantically waiting tables in the original home (after the bombing) of Patisserie Valerie on Old Compton Street, when told about the firm’s precarious financial straits. “This store is never going to close.”

With its giant Belle Époque artworks and bentwood chairs, the careworn cafe in London’s theatreland has the feel of a genuine vintage continental pâtisserie. Marcio’s tables were full of tourists and pensioners filling up on £7 croque-monsieurs and £3 millefeuilles before matinee performances of Mamma Mia! and Les Misérables. The Soho store provided the blueprint for a chain that shifted £114m of pastries and coffee last year. But the City’s favourite cake shop was looking like a burnt offering on Friday.

The dramatic fall from grace is shocking enough, but made even more incredible by the dramatis personae, most notably Johnson. Best known for turning Pizza Express into a national chain, Johnson had banked a huge second fortune – on paper at least – when he bought family-run Patisserie Valerie for £6m in 2006, when it had just 10 outlets, and launched it into the stratosphere.

Patisserie Valerie’s original branch in Old Compton Street, Soho in the 1950s. Photograph: Henry Grant Collection

After more than 30 years of building restaurant empire after restaurant empire, Johnson was estimated to be worth £260m (although £165m of that was his holding in Patisserie Valerie). He had always had an appetite for aggressive expansion. He invented the Strada brand and turned it into a chain so ubiquitous that writer Will Self once suggested there was “probably a Strada up your bum”.

“Patisserie Valerie is a Marmite brand,” said consultant Peter Backman. “It appeals to the middle-aged or people who think they are middle-aged. It’s one of those places a customer can project their own desires on to. For 15 minutes you can pretend you are somewhere else.”

But Johnson has also previously owned child-friendly chain Giraffe and the moules frites restaurants Belgo. His name was also once over the door at London celebrity favourite The Ivy.

The unravelling of Patisserie Valerie has stunned investors and analysts who had put Johnson on a pedestal, not least because of his punchy business columns in the Financial Times and more recently the Sunday Times.

In 2015 Patisserie Valerie even won IPO of the year, for leading small companies, at the Grant Thornton Quoted Company Awards. In a further irony – if one is needed – Grant Thornton is Patisserie Valerie’s auditor. It approved last year’s accounts, which showed the chain had £22m in the bank, although on Friday the company said that was certainly not the case and it was instead £10m in debt. Grant Thornton will now face huge scrutiny over the quality of its auditing work, given that the hole in Patisserie Valerie’s accounts is the subject of a Serious Fraud Office investigation.

The fact that Johnson, a former chairman of Channel 4 and a prominent Brexiter, has been able to persuade investors in the chain to part with more money is a testament to his standing.

Robert, Enzo and Victor Scalzo, who sold the business to Luke Johnson. Photograph: Frank Baron/The Guardian

Patisserie Valerie had ridden the crest of the casual dining wave. The market, defined as one in which diners spend £10 to £20 a head, has doubled in size to become a £9bn business in the dozen years since Johnson bought out the Scalzo brothers Enzo, Robert and Victor, second-generation Italians who had owned Patisserie Valerie for 20 years.

“It’s become quite normal for a lot of people, particularly in cities like London, to eat out for most meals,” said Backman. “The laws of supply and demand came together at the right time… private equity firms were pushing out brand after brand, increasing the number of restaurants because that’s how they make money. If the store wasn’t a Patisserie Valerie it would have been a burger shop and been just as busy.”

Robert Scalzo told the Observer that the irony about Patisserie Valerie was that it had “never been owned by anyone French”. He was the only one of the three brothers who didn’t want to sell, and recounted working in the Old Compton Street branch in the 80s and 90s when it attracted regulars such as fashion designer Paul Smith and photographer David Bailey. It even featured in Vogue and the New Yorker.

As the business grew it inevitably changed. “I feel it lost its soul a bit,” Scalzo said. “It’s easier when it’s small, but when you get bigger it becomes a bit of a beast.”

The casual dining boom has gone spectacularly wrong this year, with a slew of brands, including Carluccio’s, Prezzo, the burger chain Byron and Jamie’s Italian, restructuring and closing restaurants after a slowdown in consumer spending. Until last week Patisserie Valerie appeared immune – but its problems were of a different order and down to “fraudulent activity”, the company said.

By the end of Friday the company was able to confirm that it raised just over £15m by selling newly issued shares to investors. Until the paperwork is done, Johnson is lending the company £20m of his own money. Half the sum will be interest free and the cafe chain has three years to pay it back. The rest will be repaid when the new money from investors has been banked.

The company also added the caveat that previous financial statements were likely to have been wrong and if it uncovers “any further findings of financial irregularity” there could be more and bigger losses.

Nick Hood, a business adviser at Optus Restructuring, said executives of listed companies were under huge pressure to hit the financial targets promised to the City. “It’s really difficult to see what’s going on. This has happened to a highly successful entrepreneur… It’s a big business and you can’t keep tabs in detail when it is growing as quickly as that.”

Like many of its rivals, the workforce in Patisserie Valerie’s city stores is drawn from all over the world. One employee who contacted the Observer said staff in her store –from Romania and Hungary – were being kept in the dark. They were, she said, being told there were no problems, but at the same time to pay suppliers with cash out of the tills.

“There are a lot of European staff,” she said. “They are the most vulnerable because the situation is not being explained to them. They are not being told anything and are not engaged with the British press.”

Scalzo said the decision by Johnson to pump more of his money into Patisserie Valerie should now give staff hope that it can once again rise from the ashes. “It will survive,” he reckons. “Luke Johnson is a realist. If he didn’t think it was worth saving he would have let it go.”