Bernard Tapie, a French business tycoon, has been charged with fraud in the latest twist of a French corruption investigation threatening to embroil International Monetary Fund chief Christine Lagarde.

After four days of interrogation in custody, Tapie, 70, was placed under formal investigation on Friday on suspicion of having committed fraud as part of an organised gang.

The charge, which allowed police to use special detention powers normally reserved for suspected terrorists or mafia, relates to a 400-million-euro state payout Tapie received in 2008 when Lagarde was France's finance minister.

Tapie's lawyer, Herve Temime, said the charges were completely unfounded and claimed his client was confident he would be completely cleared.

"I can assure you there is nothing in the file that shows the arbitration decision was the result of fraud, or of an organised conspiracy," the lawyer said.

Adidas sell off

The investigation centres on Lagarde's decision to ask a panel of judges to arbitrate in a dispute between Tapie and Credit Lyonnais, the collapsed, partly state-owned bank, over his 1993 sale of sports group Adidas.

Tapie had accused Credit Lyonnais of defrauding him by consciously undervaluing Adidas at the time of the sale and argued that the state, as the former principal shareholder in the bank, should compensate him.

The case against Tapie could damage ex-president Nicolas Sarkozy's ability to mount a comeback for the 2017 election.

Investigators are trying to determine whether close ties between members of Sarkozy's inner circle and Tapie influenced a 2007 government decision to turn to a private arbitration tribunal to settle a dispute with now-defunct bank Credit Lyonnais.

Source: Agencies