Authorities tried to arrest Mikheil Saakashvili at his home in the capital, Kiev, on Tuesday but he escaped with help from supporters.
Police officers and prosecutors went to the tent camp early in the morning to look for Saakashvili but were met with resistance from protesters, the Kiev police said in a statement Wednesday. Zoryan Shkiryak, an advisor to the Interior Minister, has confirmed on Facebook Saakashvili's detention.
Prosecutor General Yuri Lutsenko said his office has evidence that Saakashvili's representative received $500,000 to finance protests from Ukrainian businessmen with ties to Russian Federation.
Saakashvili addressed the crowd outside parliament, called the Supreme Rada, on Wednesday, saying that prosecutors are welcome to see him there but he won't turn himself in.
Sakaashvili has been at the forefront of anti-corruption protests calling for the impeachment of Ukrainian President Petro Poroshenko.
"He (Saakashvili) has to answer to investigators and to society regarding the accusations against him", Poroshenko said.
But the two men fell out, and Saakashvili resigned from his post past year, accusing Poroshenko of corruption and blocking reforms.
Mr Saakashvili is suspected of receiving financing from a criminal group linked to ousted Ukrainian President Viktor Yanukovych.
The saga threatens to embarrass the pro-Western leadership in Kiev, although Saakashvili's party, which is now seeking to unseat Poroshenko at the ballot box, does not have nationwide support, opinion polls show. In July, Poroshenko stripped Saakashvili of the Ukrainian citizenship he received on becoming governor, opening up the possibility of Saakashvili's deportation back to Georgia, where he was wanted on charges of abuse of power.
In Georgia, he faces corruption allegations, which he denies.