Iraq spent about 75 million pounds on the devices, which are widely used by police and soldiers at security checkpoints and were meant to be a key defence against insurgents.
A series of blasts that killed hundreds in recent years had Iraqis questioning how militants got trucks, buses and cars packed with explosives through Baghdad's numerous checkpoints.
The government began investigations after reports the ADE651 bomb detection devices purchased from a British-based company were practically useless.
Major General Jihad al-Jabiri, the commander of the bomb squad, was arrested five days ago, a senior police official close to the investigation told Reuters. There are documents and incriminating evidence in the explosives detector case.
An Iraq Supreme Judicial Council official confirmed Jabiri's arrest on corruption charges but declined to provide details.
The Department for Business, Innovation and Skills announced in January 2010 it would ban exports to Iraq and Afghanistan of the ADE651 device. It is shaped like a pistol and features a swivelling antenna meant to point at explosives.
Iraqi lawmakers demanded security forces stop using them and that the government try to get its money back.
But some Iraqi officials have defended them, saying they have detected many bombs and munitions stockpiles.
Investigation revealed that Jabiri recommended that Iraq sign five contracts to supply security forces with the detectors for between 23,548.37 pounds and 34,702.86 pounds each even though the real cost of the devices is no more than 61.97 pounds, the senior official said.
The first contract, valued at about 11 million pounds, was signed in January 2007 and will be the first case taken to court, the official said.
This is one of many cases that Jabiri is linked to regarding the same issue, the official said.
The inspector general of the Interior Ministry, which controls the police, said he investigated the detectors two years ago and found them inoperative and costly. He recommended that Iraq should not buy the devices.