IMF chief Christine Lagarde went on trial in France on Monday over a massive state payout to a flamboyant tycoon when she was finance minister in a case that risks tarnishing her career.

Lagarde denies the charges of negligence, arguing she was acting "in the state's interest" in making the payment to Bernard Tapie, the former owner of sportswear giant Adidas and the Olympique Marseille football club.

If found guilty, Lagarde could receive a one-year prison sentence and a $15,900 fine.