Paris (AFP) - A bankrupt Luxembourg investment firm once chaired by disgraced former IMF chief Dominique Strauss-Kahn will be investigated for fraud, a French judicial source said Thursday.

French prosecutors set out charges of organised fraud, misuse of corporate assets and breach of trust against Paris-listed Leyne Strauss-Kahn and Partners (LSK) earlier this month.

"The investigators are interested in the functioning of LSK from 2007 and not only during the period when Dominique Strauss-Kahn was chairman," the source said.

It is the latest in a series of scandals for the former French minister, which have derailed the career of a man once considered a frontrunner for the French presidency.

He resigned as head of the International Monetary Fund in 2011 after being accused of attempted rape in New York, although the charges were later dropped.

He faced trial last year for his alleged role in a prostitution ring in France, but was acquitted.

Strauss-Kahn had hoped to turn LSK into a $2 billion investment fund and headed its board of directors from September 2013 to October 2014.

But the firm went bankrupt in November 2014, owing nearly 100 million euros to more than 150 creditors, according to a source close to the investigation.

Former shareholders of LSK have accused Strauss-Kahn of lying about the health of the company's finances.

Jean-Francois Ott, former chief of real estate firm Orco, launched the initial complaint, saying he was given false information about LSK and lost 500,000 euros ($560,000) that he invested in July 2014.

Strauss-Kahn has blamed the company's mismanagement on his business partner, Thierry Leyne, who committed suicide in October 2014.

The company was declared bankrupt a few weeks later.

Strauss-Kahn quit the firm just days before Leyne's death and accused his former associate of "excessive borrowing".

The investigators will seek to determine whether he had a direct role in managing the company's funds, which he denies.

Strauss-Kahn said in a letter to the Luxembourg judiciary in November 2014, seen by AFP, that board meetings did not reveal any serious difficulties in the finances, and daily operations were left to Leyne.

Strauss-Kahn's lawyer Jean Veil said that in autumn 2014 his client had "made the Luxembourg prosecutor aware... of irregularities he had noticed."

Veil added that the former IMF chief "received no remuneration for his work at LSK and lost the value of his investments. He is himself a financial victim of Thierry Leyne ".

But critics say he must have known about LSK's financial difficulties, noting that the firm stopped making payments in May 2014.

Yohan Attal, lawyer for a couple, the Urbachs, said that at the time when his clients were considering solicitations from LSK, "the directors of the company and the president knew their merchant bank was bankrupt".