Johanne Liu rose to fame during a massive student protest movement last year, being dubbed the "Sunflower Queen" by the media.
However, she is under investigation for a cross-border prostitution and human trafficking ring that operates between US and Taiwan, reports The China Post.
Prosecutors said Liu was questioned in the Taipei District Prosecutors Office on Tuesday night and was released the next morning on NT$50,000 (S$2,000) bail, and is currently barred from leaving the country.
Prosecutors also said Liu allegedly solicited other women from Taiwan for prostitution in the US. Liu posted a statement on her Facebook page yesterday evening, denying what she said are false rumours.
"I kept silent because of the judicial investigations. It does not equal an admission of guilt," said Liu. Investigators, however, said it is not likely that Liu was involved in the case.
They reportedly found no record of her traveling abroad recently, and no unusual transactions in her bank account, according to the Central News Agency.
This is not the first time Liu has been accused of prostitution. Last year, tabloid magazine Next reported that Liu was working as an "escort". A journalist went undercover to bargain with Liu and recorded the entire process.
Liu accused the magazine of defamation, claiming she was tricked by the journalist and was "only selling wine" at the hotel.