National Youth Service (NYS) boss Richard Ndubai has been arrested as the public prosecutor orders immediate prosecution of all suspects named in the Sh9 billion scandal.
Police arrested 16 other suspects, 12 in Nairobi and four in Naivasha in dawn crackdown.
Suspects were first taken to Muthaiga, Gigiri and Central police stations but have now been transferred to the Directorate of Criminal Investigations headquarters on Kiambu Road, Nairobi awaiting processing.
Mr Ndubai and four others spent the morning at the Muthaiga Police Station.
Nairobi County Criminal Investigating Officer Ireri Kamwende confirmed the arrests.
The Director of Public Prosecution Noordin Haji's directive comes a day after he received files on 10 companies and more than 40 individuals named in the ongoing NYS scandal from the Director of Criminal Investigations George Kinoti on Sunday.
"The DPP has independently reviewed all the inquiries files related to the ongoing investigations at NYS and has directed prosecution commences immediately against all the named suspects," the office of the public prosecutor tweeted on Monday morning.
Additional reporting by Joel Muinde