All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His slave and Messenger.
We have already issued Fatwa 88451 clarifying that it is not acceptable for a Muslim man to marry a woman from the People of the Book unless she is chaste, and the woman you inquired about is very far from chastity; she already had two children from illegal sexual intercourse and she works as a pimp.
We have also issued Fatwa 122443 clarifying that it is not permissible to marry a woman who is pregnant from Zina (fornication or adultery) until she gives birth.
If the situation is as you mentioned, that this man married this woman while she is not chaste, then this marriage is void. This invalidity is even more confirmed if he married her while she was pregnant. Therefore, this man should first of all sincerely repent to Allaah and then separate from this woman as he is not permitted to have sexual intercourse with her.
For more benefit on the conditions of repentance, please refer to Fataawa 86527 and 87903.
As regards the daughter, she is born out of illegal sexual intercourse so this man has no relation with her; rather, she should be traced back to her mother.
For more benefit on the ruling of a child born out of Zina, please refer to Fatwa 89082.
Allaah Knows best.