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Lagarde put under investigation in fraud case: Report

IMF chief Christine Lagarde has been placed under formal investigation by French magistrates on Wednesday for her alleged role in a long-running political fraud case, a source close to the former French finance minister said.

The source said Lagarde, who earlier was questioned by magistrates in Paris under her existing status as a witness, considered their decision to investigate her for alleged "negligence" was unfounded and would appeal it. A French judiciary source also confirmed the step.

Gerry Rice, IMF Communications Director said in a statement e-mailed to CNBC that the Managing Director had already made a statement on the matter. "She is now on her way back to Washington and will, of course,brief the Board as soon as possible. Until then, we have no further comment."

Read MoreTrichet: French govt now has 'clear line and course'

In French law, magistrates place someone under formal investigation when they believe there are indications of wrongdoing, but that does not always lead to a trial.

Christine Lagarde
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Christine Lagarde

The inquiry into tycoon Bernard Tapie has embroiled several of former president Nicolas Sarkozy's cabinet members including Lagarde.

Read MoreIMF cuts global growth outlook as US recovery falters

Tapie - who supported Sarkozy in the last two elections - was awarded 403 million euros in a 2008 arbitration payment under Sarkozy's presidency to settle a dispute with the now defunct, state-owned bank Credit Lyonnais over a 1993 share sale. Lagarde was finance minister at the time.

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