Prosecutors say Luis Cutipa is accused of influence peddling, negligence and other crimes.
His job is to regulate the transport and sale of legal coca and seize leaves that exceed legally permitted production quotas. It is not clear what happened to coca leaf that was allegedly diverted. Coca is the basis of cocaine.
A political ally of President Evo Morales, Cutipa is also accused of doubling the price of licenses for coca vendors.
He declared his innocence after his arrest Tuesday.