Jitender, 28, was arrested on Wednesday from Mangolpuri in west Delhi.
A total of seven people, including two Delhi police constables Manoj and Pawan, along with three pimps - Neeraj, Vijay and Sunny - and two women have been arrested in the case so far.
Manoj was posted in the Mangolpuri police station while Pawan was working with the Crime Branch.
Jitender, under cover of being a police informer, started committing 'honey trap' crimes with his associates to earn quick and easy money.
"He was running an extortion racket by luring innocent clients in his trap by using beautiful girls," said Additional Commissioner of Police (Crime Branch), Ravindra Yadav.
A case was registered in August this year at the Crime Branch police station on an extortion complaint of Rs 3 lakh against some police personnel.
The victim was lured by a woman and her co-associate in Rani Bagh in west Delhi.
"The accused posing themselves as Crime Branch officials detained the victim for several hours in a false rape charge and beat him up," said the officer.
They demanded Rs 6 lakh from him and succeeded in fleecing him of Rs 3 lakh following negotiations.
Yadav said a woman gang member would take a client to their place and no sooner were they in a compromising position, then other gang members posing as Crime Branch officials would barge in and catch the customer.
"They pretended to arrest the client on rape charges. Once he came under pressure, they demanded a huge sum of money for not taking legal action," said Yadav.