Federal officials have begun a criminal investigation of defeated Delaware Senate candidate Christine O'Donnell (R) regarding her alleged use of campaign funds for personal expenses.

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The Associated Press cited an unnamed source in reporting Wednesday that FBI agents and federal prosecutors have been assigned to the case, which has not yet been referred to a grand jury. 

O'Donnell, a Tea Party favorite, pulled off a stunning upset of veteran Rep. Mike Castle (R) in the GOP Senate primary, raking in a state-record $7.3 million-plus fundraising haul.

But the conservative activist was dogged with questions about her alleged disbursement of $20,000 from her campaign account to pay her rent and other personal expenses.

The non-partisan watchdog group Citizens for Responsibility and Ethics in Washington (CREW) filed a complaint with the Federal Election Commission in September over the payments.

Matt Moran, an O'Donnell campaign spokesman, issued a statement saying he is confident the charges will be dismissed and that they are politically motivated. 

"The anonymous source seems politically-motivated and may well be tied to the ultra-liberal, George Soros-financed, former Sen. Biden staffer-run CREW complaint," Moran said.

"These charges are already being addressed with the FEC," he added. "We are confident that they will be resolved in the New Year, and put an end to the frivolous sensationalism regarding this matter."

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-- This post was updated at 3:25 p.m. and at 5:16 p.m.