Former IMF head Dominique Strauss-Kahn is being questioned by French police as a suspect in a prostitution ring inquiry, a prosecutor says.
Mr Strauss-Kahn, once a front-runner for the French presidency, is being held in custody at a police station in Lille, northern France.
Police have questioned a number of prostitutes who have admitted having sex with Mr Strauss-Kahn.
He insists he did not know that the women were prostitutes.
"I challenge you to distinguish a naked prostitute from any other naked woman," his lawyer Henri Leclerc has told French television.
Mr Strauss-Kahn resigned as head of the International Monetary Fund (IMF) in May 2011 after he was charged in New York with the attempted rape of a hotel maid. The case was later dropped.
In this separate inquiry, French police have already arrested eight men on suspicion of organising a prostitution ring and misusing corporate funds to pay for sex in a scandal known as the "Carlton affair" because of a Lille hotel where clients were allegedly supplied with call-girls.
Three of the suspects were said to have been close to Mr Strauss-Kahn, who is said to have taken part in sex parties in Paris and Washington in late 2010 and early 2011.
He could be held by police for up to 48 hours, French media say.
The BBC's Christian Fraser, in Paris, says that although consorting with prostitutes is legal in France, supplying them to others and misusing company funds to pay for them are not.
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