A man arrested in Malta over his alleged role in defrauding the US navy of $50 million fraud returned to America this weekend.

Frank Salvatore Rafaraci, a 68-year old Italian-American from New York, was briefly arrested in September and was facing extradition proceedings in the Maltese courts.

On Monday, the case took an unexpected twist when it emerged that Rafaraci had flown out to the US at the weekend after reaching an agreement to settle his affairs with authorities in his homeland.

In view of Rafaraci's return to the US, the extradition request was withdrawn and the court proceedings were dropped.

Rafaraci decided to return to the US after a court on Friday ruled that proceedings to extradite him to the US should continue.

Lawyers Giannella de Marco, Stefano Filletti, Stephen Tonna Lowell and Mark Refalo were counsel to Rafaraci.

Inspectors Omar Zammit and Robinson Mifsud prosecuted, assisted by AG lawyer Meredith Ebejer.

Sources familiar with the case said that in 2015 Rafaraci had been a key player in a scheme that used falsified invoices and receipts for equipment and supplies provided for the US Navy.   

He is also alleged to have paid a US government official tens of thousands of euros in cash bribes in exchange for insider information on upcoming navy contracts.  

US authorities believe  Rafaraci and his known associates then laundered illicit funds using a series of bogus shell companies, evading millions of dollars in US taxes.