MLA John McCallister has been questioned by detectives investigating allegations of the misuse of public funds.
The South Down politician says he has nothing to hide and has done nothing wrong.
In a tweet this morning, his former party NI21 said: “NI21 is not under investigation.
“It has been the victim of a crime and will issue a statement shortly.”
Detectives questioned the 43-year-old yesterday at his home in Rathfriland and seized his computer and documents.
A 41-year-old man was also interviewed in relation to the fruad.
Police said they are investigating misuse of public funds allegations under the Financial Assistance to Political Parties fund.
Mr McCallister said he will defend the actions he has taken and will cooperate fully with the authorities.
Police said two men are to be reported to the Public Prosecution Service.
PSNI Chief Superintendent Peter Farrar said police were investigating allegations of the misuse of public funds.
“The allegations relate to potential fraud and theft by a small number of individuals relating to money available under the Financial Assistance to Political Parties Fund,” Mr Farrar said
He added: “Two men aged 43 and 41 were interviewed today and are to be reported to the Public Prosecution Service.
“A number of items have been seized as part of ongoing police inquiries. Authorities at the Assembly have been advised of the police investigation.”
The authorities at Stormont have been informed of the PSNI investigation.
McCallister, who is now an Independent MLA, was first elected to the Northern Ireland Assembly in 2007.
He is a former deputy leader and founder member of NI21, and before that he was a member and one-time deputy leader of the Ulster Unionist Party.