The National Turkish Association (Turkiska riksförbundet) landed in hot water earlier this month when its deputy chair had to resign after he publicly called for death to Armenians "dogs" during a weekend speech in downtown Stockholm.
Barbaros Leylani's speech prompted the Swedish Agency for Youth and Civil Society to review whether the association meets the basic requirements of democratic values. The agency issues government grants to civil society groups and can demand the Turkish association pay back funds it received if it fails to live up to certain standards.
"This statement is not compatible with respect for human equality and respect for human rights and therefore we, on our own initiative, started this investigation," the agency's head of communications Anders Hagquist told Swedish Radio.
Hagquist added that the agency was also reviewing older complaints about the group in light of Leylani's racist speech.
"We have received some complaints in the past and now we need to look at them," he said, "they are also associated with this."
Speaking to a crowd of a few dozen, Leylani called for Turks to awake, and for death to what he called "the Armenian dogs" to cheers from the crowd. Leylani later apologized on the association's website.
The National Turkish Association has sought to distance itself from Leylani and warns that it could go bankrupt if force to pay back the support it received from the state.
"There's a big chance that we would probably go out of business and there wouldn't be any association anymore," the group's secretary Yasin Ipek said.
He said the last few weeks of debate has been unfair toward the group, labeling them as racists or fascists. Ipek said the association shouldn't be punish because of the action's of one person.
Ipek himself face controversy this month when he was photographed at a dinner attended by leaders of the Swedish branch of the Turkish ultra-nationalist group, the Grey Wolves.
A member of the Social Democrats, Ipek resigned from his post on the education and workplace committee in Sigtuna municipality.
Green Party member Mehmet Kaplan, Sweden's former housing and IT minister, was also photographed at the dinner and late resigned.