Chairman of the Cronulla Sharks rugby league club Damian Keogh says he does not have a drug problem following his arrest for possession of an illegal substance.

Former basketball star Keogh, 55, was allegedly found with a small resealable bag containing a white substance at a Woolloomooloo pub as police conducted a drug dog sweep.

Sharks chairman Damian Keogh. Credit:Chris Lane

"It's obviously been a very distressing time personally and for the family. I've just been bunkering down and trying to register things," he told News Corp.

"I've stood down as chairman of the Sharks to try and distance myself from that at this stage.