The two were accused of marking up the market value of an investment portfolio to hide its plummeting value. The portfolio eventually incurred a $6 billion loss for JPMorgan, the biggest U.S. bank by assets. For months following its disclosure, the shortfall was attributed to Bruno Iksil, a trader who became known as the "London Whale".
Martin-Artajo was taken before a National Court judge, who released him without bail after an hour of questioning but prohibited him from leaving Spain without permission and ordered him to appear in court every two weeks.
A court spokesman said Martin-Artajo denied the U.S. charges, saying they were based on a false accusation. He said he will challenge any extradition request.
The United States now has 40 days to formalize the request.
Martin-Artajo were both based in London when they worked at JPMorgan. Grout is a citizen of France.
Edward Little, a New York-based lawyer for Julien Grout, told the Associated Press that Grout is in France and currently negotiating his possible return to the US with the US attorney's office in Manhattan.
"Julien returned to France several months ago for financial reasons, he's not a fugitive," Little said. "France doesn't extradite its citizens." Little said that Grout has not yet decided whether he'll return to the US.
U.S. Attorney Preet Bharara said this month they had contacted the two men's lawyers and hoped they would present themselves in the United States.
Prosecutors said that they had agreed not to prosecute Iksil. The deal, however, requires him to cooperate fully with law enforcement.
Martin-Artajo oversaw JPMorgan's trading strategy in London, and Grout, his subordinate, was in charge of recording the value of the investments each day. They were charged with conspiracy to falsify books and records, commit wire fraud and falsify Securities and Exchange Commission filings. They also were charged separately in an SEC civil complaint.
The charges focus on an investment portfolio whose components were supposed to be marked at their market value each day as best as the bankers could approximate. The charges say that from March to May 2012, under Martin-Artajo's direction, Grout began using prices for the portfolio "deliberately chosen to minimize losses rather than represent fair value," the SEC said.
Iksil, unhappy with Martin-Artajo's orders, asked Grout to keep a spreadsheet to track the difference between the manipulated prices and the actual prices, according to U.S. Justice Department's charges.
The "London Whale" accusations have been a heavy burden for JPMorgan, tarnishing its reputation as a risk manager and the favorite of Washington lawmakers. The bank, which is used to coming out ahead of its peers, has been forced to restate its earnings and face bruising hearings in front of Congress.
Nonetheless, even with the trading loss, JPMorgan last year recorded in its biggest annual profit and its stock is up by a third from its pre-"London Whale" price.
Associated Press writer Greg Keller contributed to this report from Paris.