Police have issued an arrest warrant for Michel Keslassy, 50, who was given a three-and-a-half year sentence in June for buying untaxed carbon credits abroad and adding on value-added tax (VAT) when he traded them in France.
The VAT was never declared.
A French court ordered Keslassy's release from prison in November for health reasons on condition that he was monitored electronically using the bracelet.
But after "a few days", the device "stopped working", the source said.
Carbon trading provides financial incentives as a way of reducing carbon dioxide (CO2) emissions. Companies that exceed their agreed carbon limits can buy up unused emissions, or "credits", from lesser polluting firms.
Carried out in 2008-09, the carbon fraud was one of the biggest ever registered in France, authorities said, and cost Europe some €5.0 billion, according to the EU's law enforcement agency Europol.
Keslassy was fined €65.5 million -- equal to the amount of unpaid VAT.
He has appealed and the case is due to be heard in February next year.