At the height of his fame, the Italian designer Gai Mattiolo was hailed as “the new Versace” and acclaimed for voluptuous, over-the-top creations worn by blue-bloods and celebrities from Queen Sofia of Spain, to Lauren Bacall and Sharon Stone.

Last week, however, Mattiolo, 39, was a prisoner in his luxurious Rome mansion after a prosecutor placed him under house arrest.

Following an inquiry by Italy’s finance police, who specialise in investigating tax offences and financial fraud, Mattiolo has been accused of siphoning off £1.8m to a bank account in Luxembourg after seeking official help to ward off bankruptcy.

“It’s a mistake, I’m just the victim in this whole affair,” Mattiolo protested, adding that he had long been at odds with his former lawyer, Giancarlo Tabegna, who is also accused of fraudulent bankruptcy. “My name has been unjustly dragged through the mud on the eve of my next collection, in which I hope to make my comeback.”

Mattiolo, whose fame was associated with the excesses and extravagance of the 1990s, tasted success from his very first show. His parents had wanted him to become a lawyer, but in 1987 he borrowed money from his father to pay for a collection and he was variously described as a child prodigy and “king of the buttons”, for his profligate use of diamonds, emeralds and sapphires as jacket buttons.

His early sponsors included Italian royalty and Ursula Andress, the actress.

As his fame grew, celebrities who flocked to his shows, which were noted for plunging necklines and bare bottoms, included La Toya Jackson, Diana Ross and Ivana Trump.

At a private audience in the Vatican in 1996, he gave the late Pope John Paul II four richly decorated chasubles.

Recently his star has waned with rumours of financial troubles. He did not stage any shows in 2006 and for most of 2007, and closed his stores in Milan, Bologna and Beirut.

The Italian media were quick to herald his downfall when at dawn on December 5 police officers called at his mansion, which has a huge private park, to notify him that he was under house arrest.

Only a handful of the glitterati rallied to his defence. His friend Princess Marina Doria, a member of Italy’s former royal family, said: “I would never have expected a gentleman like Gai to end up in such an unpleasant business. I hope it’s a mistake. He’s a fine man, a little shy.”

The actress and showgirl Valeria Marini commented: “I’m very sorry for the affair that has hit Gai Mattiolo. I’m as fond of him as I’ve always been.”

Other fashion experts were less supportive. “Gai Mattiolo is one of us. But creative geniuses are often naïve about business,” said stylist Renato Balestra.

Fernando De Vincenzi, a former business partner, said: “Maybe he’d bitten off more than he could chew.”

Mattiolo plans to fight back. He rejected charges put to him by a judge last week and said he was certain that his name would soon be cleared.

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