Thousands of rich Japanese women were conned into believing lambs were valuable miniature poodles.
Flocks were imported from the UK and Australia to be sold by an internet company as the latest "must have" pet.
The scam was rumbled when movie star Maiko Kawakami complained on a talk show that her new poodle refused to bark or eat dog food.
She showed photos of the animal and was devastated when told that it was a lamb, reports The Sun.
Hundreds of women contacted police to say that they had also been sold lambs instead of pedigree pups by the con artists based in Sapporo.
One couple found out the truth only after a dog beautician told them she could not trim their poodle's claws - because they were hooves.
The company, whose name translated as Poodles As Pets, has now been shut down.
Bosses took advantage of the fact sheep are rare in Japan and most people do not know what they look like.
They advertised poodles online for £630 - half the price of the highly-desired puppies in Japan which carry a £1260 price tag.
A police spokesman said: "We launched an investigation after we were made aware that a company were selling sheep as poodles."
Flocks were imported from the UK and Australia to be sold by an internet company as the latest "must have" pet.
The scam was rumbled when movie star Maiko Kawakami complained on a talk show that her new poodle refused to bark or eat dog food.
She showed photos of the animal and was devastated when told that it was a lamb, reports The Sun.
Hundreds of women contacted police to say that they had also been sold lambs instead of pedigree pups by the con artists based in Sapporo.
One couple found out the truth only after a dog beautician told them she could not trim their poodle's claws - because they were hooves.
The company, whose name translated as Poodles As Pets, has now been shut down.
Bosses took advantage of the fact sheep are rare in Japan and most people do not know what they look like.
They advertised poodles online for £630 - half the price of the highly-desired puppies in Japan which carry a £1260 price tag.
A police spokesman said: "We launched an investigation after we were made aware that a company were selling sheep as poodles."