Disgraced former International Monetary Fund (IMF) chief Dominique Strauss-Kahn was held by French police Tuesday over his alleged involvement in a high-class prostitution ring.

Police in Lille are holding the former banker after prostitutes said they had had sex with Strauss-Kahn during 2010 and 2011 in a string of luxury hotels in Paris and Washington D.C.

Strauss-Kahn, a former finance minister once seen as a strong contender for France's 2012 presidential election until a sexual assault case in New York last May brought his ambitions to an abrupt halt, could be held in custody until Thursday morning.

The investigation is focused on a prostitution ring that allegedly supplied clients of Lille's luxury Carlton hotel.

Police want to establish whether Strauss-Kahn knew that women at parties he attended in Paris and Washington were prostitutes.

Strauss-Kahn's lawyer Henri Leclerc has said his client had no reason to think they were.

People are not always clothed at these parties. I challenge you to tell the difference between a nude prostitute and a classy lady in the nude, Leclerc recently told French radio.

The case focuses on whether Strauss-Kahn knowingly had sex with prostitutes paid for out of company funds -- which, unlike paying for sex, is illegal in France.

Eight people, including two Lille businessmen close to Strauss-Kahn and a police commissioner, have been arrested in the case, and construction firm Eiffage fired an executive suspected of using company funds to hire sex workers.

While his wife Anne Sinclair has revived her career as a journalist with a new job as news editor at an upcoming French-language version of the Huffington Post, Strauss-Kahn has gone from a life at the heart of France's intellectual and social elite to living largely in the shadows.

Photographed occasionally out and about in Paris, recently in a scruffy dark grey anorak, he is starting to make a comeback on the international speech circuit but is otherwise rarely seen on the social circuit.

Reuters contributed to this story