Yorgen Fenech, a prominent businessman arrested on Wednesday in connection with investigations into the murder of Maltese journalist Daphne Caruana Galizia, was released on bail on Thursday evening, police sources said.
Police granted him bail as investigations continue and he will be under round-the-clock police surveillance.
Fenech was arrested on board a yacht shortly after it left Portomaso marina early on Wednesday morning.
A spokesman for the Office of the Prime Minister confirmed to Euronews Wednesday that Fenech, a director of local firm the Tumas Group, had been "stopped for questioning".
"No charges have been issued yet," the spokesperson added.
Fenech is a director and co-owner of a business group that won a large energy concession in 2013 from the Maltese state to build a gas power station on the island.
Earlier, Reuters reported that Fenech had been intercepted his yacht off the Mediterranean island, sources with knowledge of the matter said.
Fenech's luxury yacht Gio left the Portomaso yacht marina, five miles (eight kilometres) north of Valletta, shortly before dawn. Police swiftly boarded the vessel and forced it to return to port.
His arrest came the day after the government said it would offer a pardon to a suspected middleman in the 2017 murder of Caruana Galizia if he named the mastermind behind the killing.
The middleman is believed to have linked the person suspected of commissioning her murder, to the men accused of carrying out the killing, as well as those who helped procure the explosive device used in the operation.
The Prime Minister's Office said that the man "showed willingness, after some time of interrogation by the police, to collaborate" but that he "asked to be granted a presidential pardon first" for all the cases he might have been involved in.
The island's leader added that after some negotiations with the man's lawyers, he drafted and signed a letter giving the suspect assurances that if he "gave all the information and evidence that he had, and if all this could be corroborated in court, I would recommend that this person be given a presidential pardon."
On Thursday Muscat said that so far the suspected middleman had not given complete information. Under Maltese law, the police had until early Friday morning to either charge or release Fenech.
Caruana Galizia, a well-known investigative journalist who wrote an anti-corruption blog, was killed by a car bomb near the Maltese capital Valletta in October 2017 - a murder that shocked Europe and raised questions about the rule of law on the Mediterranean island.
The arrest was carried out on Thursday morning during a Europol-backed operation into money laundering, the statement from the Prime Minister's Office confirmed.
Investigators are following an alleged money trail between the suspected middleman and three men accused of killing the 53-year-old journalist, The Times of Malta reported.
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The men, who include two brothers, were charged with triggering the car bomb in December 2017. The trial is yet to take place.
The government's decision regarding a presidential pardon is believed to have been discussed at a Cabinet meeting on Tuesday where some ministers were said to be reluctant to grant it.
Muscat justified the decision in his statement, saying that "the government did what it had to do."
"As I said from the start, I will leave no stone unturned in this case. There is no question of impunity for whoever is responsible for this crime," he added.
In September a public inquiry was ordered into Daphne Caruana Galizia's murder, in response to recommendations made in a report by the Council of Europe - a non-EU human rights body with 47 member states. It said the failure of the Maltese authorities to bring perpetrators to trial raised serious questions about the rule of law on the island.
The independence of the inquiry has been questioned by the murdered journalist's sons