French authorities search the Paris apartment of IMF chief Christine Lagarde on Wednesday.

Officials are investigating Lagarde's involvement in the so-called "Tapie Affair" - a controversial 2008 arbitration payment to billionaire Bernard Tapie - a supporter of former French president Nicolas Sarkozy.

Tapie had sued the government - after selling his stake in the sports company Adidas - to then state-owned bank Credit Lyonnais.

He argued the bank defrauded him - after it sold his share of the company at a much higher price.

The bank denied wrongdoing - but Lagarde - serving as Sarkozy's finance minister at the time - ended a court battle -- resulting in a 285 million euro - or $367 million dollar - payout to Tapie.

Magistrates suspect Lagarde of complicity to misusing public funds - after she rejected advisers' objections to proceed with the arbitration.

Lagarde has denied any wrongdoing - in the 2-year-old investigation.