The arrests of Nikki Sinclaire and three other people were part of an inquiry following an allegation made in 2010 into allowances and expenses.
Two women, aged 55 and 39, a man aged 19 and Ms Sinclaire, 43, have been released on police bail.
A statement on behalf of Ms Sinclaire said she disputed all allegations put to her or her staff.
She was arrested at a police station in Birmingham and the other three were arrested at addresses in Solihull, Worcester and Birmingham on Wednesday.
Officers have been carrying out searches at the addresses involved.
A statement released on behalf of the independent MEP said: "The allegations at hand are old allegations from a disgruntled ex-employee..."
The statement added that Ms Sinclaire was "eager to clear her name and has nothing to hide".
It said Ms Sinclaire attended a police station voluntarily on Wednesday, and both she and her office would "continue to fully co-operate with the police on this matter".
In a short statement, UKIP said Ms Sinclaire ceased to be an MEP for the party in 2010.
The statement said: "It would be inappropriate for the party to make any comment during the process of an ongoing police inquiry."