Spain's unsuccessful bid to run a second F1 event looks set to end in greater ignominy as the national prosecutor's office investigates allegations of corruption by organisers of the European Grand Prix in Valencia.

The city's America's Cup port hosted the race for five years between 2008-12 and had been due to alternate with Barcelona as the home of the Spanish Grand Prix from 2014, but attempted to withdraw from its long-term contract with Formula One Management when a change of local government officials determined that the EUR40m event was a drain on financial resources.

"Valencia president Alberto Fabra is determined to correct the nonsense of a grand prix that he inherited from his predecessor Francisco Camps and has cost a fortune to the public purse," Spanish newspaper Diario Sport reported at the time, "In this context, it would be very difficult to explain to the taxpayers of the region that more money is being allocated for F1."

Although the story believed that FOM was seeking EUR33m to terminate Valencia's deal ahead of time, further problems now appear to lay ahead of its organisers, with Associated Press claiming that an investigation has been opened into alleged corruption and embezzlement by those behind the event.

Former regional president Camps, tourism official Dolores Johnson and Jorge Martinez, a shareholder in the Valmor Sports company assigned the hosting rights by Camps, are all named in the writ, which calls on the courts to investigate alleged irregularities, including how Camps allowed a private company with no experience in motorsport and only 12 employees, to operate the multimillion-dollar event. The proceedings also names Camps as a suspect in cases of misappropriation of public funds and corruption.

The street circuit, which took racers between the various America's Cup warehouses as part of a spectacular harbour-side setting, began to fall into disrepair within seven months of home hero Fernando Alonso's victory in the 2012 European Grand Prix, with looted electrics, flooded access tunnels, sewers without manhole covers and 'a bridge that cost two million Euros now only used by homeless to spend the night'.

Valencia was left off the 2013 calendar, due to have been replaced by a second American event on the streets of New Jersey, but the US bid foundered, and continues to do so. Bernie Ecclestone has cast doubt on the much-hyped race ever making the calendar, having been left out of 2015 plans.

"The Americans want other races, but I'm not too sure that we do," he said this week.