The 46-year-old was arrested at the weekend in a police raid on a gang of bookmakers reportedly illegally taking bets on IPL matches.
Raza, who played nine Tests and 49 one-dayers for Pakistan between 1989 and 1995, was released on bail today but will have to appear in a Lahore court later this week.
"It was a set-up against me," Raza told AFP. "I have nothing to do with the illegal betting in IPL and visited a friend's office where police came and arrested us."
Police said they acted on a tip-off and recovered telephones, computers, televisions and a large amount of money.
"I will appear in the court and fight out my innocence and will not allow my umpiring career to suffer," said Raza, who officiates domestic matches in Pakistan.
"I will be writing to PCB (Pakistan Cricket Board) through my lawyer in a couple of days to explain my point of view and to prove my innocence."
Raza was one of six players fined after a match-fixing inquiry against Pakistani players between 1998 and 2000.