The allegations have been made in relation to government-backed agencies, Fannie Mae and Freddie Mac, which were put under the protection of the Federal Housing Finance Agency (FHFA) in 2008 amid the subprime mortgage crisis.
The FHFA has claimed JP Morgan had misstated the ability of borrowers to pay back their home loans, according to reports from the Financial Times.
A book worth approximately $33bn in loans is said to have been sold to Fannie Mae and Freddie Mac prior to the financial crisis, but as default rates started to rise the value of the portfolio plummeted.
JP Morgan is understood to be fighting the allegations, naming Bear Stearns and Washington Mutual as parties which sold on the bad debts.
Meanwhile, in Madrid, Martin-Artajo was arrested after he was located and asked to turn himself in, according to reports.
He is wanted by US authorities in connection with altering JP Morgan records to hide over $6bn in trading losses alongside fellow ex-trader Julien Grout and Bruno Iksil, known as the “London Whale”.
Iksil is reported to have cut a deal with prosecutors in return for cooperation over building a case on Martin Artago, who was his supervisor.
