Reuven Gavrieli, an uncle of Likud MK Inbal Gavrieli, was arrested on March 15 on suspicion of illegally operating a Tel Aviv casino, police said.
He was apprehended following an overnight police raid on the casino, located in a building he owns.
During his interrogation, Gavrieli, who owns a string of casinos in Turkey and Eastern Europe, said he was "unaware" a casino was operating at the site, police said.
Gavrieli's arrest came just five days after Tel Aviv police announced that they had seized four suspected hit men from Belarus, who allegedly tried to murder Inbal Gavrieli's father Shoni in January by placing a bomb in his car while it was parked at Tel Aviv's Azrieli Center.
The planned attack was thwarted when the bomb fell off and was defused by police sappers. It was first thought it was placed in the underground parking lot by terrorists.
Police believe that the hit men were hired by a local crime family as part of an underworld power struggle, and say that Gavrieli may have been a target because of his alleged business contacts with underworld figures.
The Gavrieli family has repeatedly denied any involvement in organized crime.
Inbal Gavrieli said last week that she was "certain" that her father was not the intended target of the hit, and accused police of being "impotent" in their war against crime.
In an open letter to other MKs in the fall of 2003, she lamented the "double standard" being used against her family.
"If anyone has any facts or proof of illegal activity concerning me, my father, or my uncle, let them pass it on to the relevant authorities," she wrote. "But because no one does - leave my family alone."
The issue of organized crime was catapulted to the headlines in December following a failed assassination attempt on underworld kingpin Ze'ev Rosenstein in the heart of Tel Aviv, a bombing which claimed the lives of three innocent bystanders.
Police have identified six major organized crime families operating here, which are fighting for control of gambling, prostitution, and drugs, operations which are estimated to be worth about NIS 14 billion a year.
The government has rejected a police request for NIS 1.3 billion over the next three years to fight organized crime.