Stepan Chernovetsky, whose father served as mayor of the Ukrainian capital between 2006 and 2012, was arrested along with 10 other people in Barcelona, sources close to the investigation said.
The ring is suspected of having laundered over €10 million ($11 million) through a network of companies in Cyprus and the Virgin Islands that bought real estate in Spain, anti-corruption prosecutors said in a statement.
The origin of this money “has not been duly justified” since the ring did not have “legal income which could justify the increase in their property assets”, the statement added.
Spanish authorities suspect the ring may also have chaneled money through a well-known luxury Japanese restaurant in Barcelona, Yubari.
Famous footballers such as Argentina's Lionel Messi and Brazil's Neymar were known to dine at the restaurant.
Public prosecutors ordered the restaurant to be closed and demanded the arrest of its owner, Armenian national Arman Mayilyan, an investigation source said.
The majority of those arrested were Ukrainian and Russian nationals.
Prosecutors accuse them of being members of a criminal group, money laundering, document falsification and tax fraud.
Police carried out 16 searches in Barcelona and the nearby beach resort of S'Agaro as part of the investigation, police said in a statement.
Last month Spanish police arrested eight people and seized €62 million as part of another probe into a group suspected of laundering Russian mafia money by buying property on the Catalan coast.
A hugely controversial figure with many enemies, Chernovetsky senior had a controlling stake in the Ukrainian bank Pravex until 2008, when Italy's Intesa SanPaolo bought the bank for $750 million.
Nicknamed “Lyonya Kosmos” for his spaced-out eccentricities, the mayor has been accused of insanity by opponents after antics that included recording a disc of 1980s hits and proposing to auction off his kisses.