Police have arrested 14 people over claims security workers were bribed by convicts to deliberately fit electronic ankle tags loosely.
Staff at Capita, which is contracted to run the government's Electronic Monitoring Service (EMS), were allegedly paid £400 a time to help at least 32 offenders beat their court-imposed curfews, according to a report in The Sun.
The Metropolitan Police said three current and former EMS workers were among those arrested in January in connection with a series of offences involving the monitoring of offenders.
The Ministry of Justice (MoJ) said it was "urgently" investigating the claims.
A spokesman for the EMS said it was "closely co-operating with the Metropolitan Police".
A Met spokesman said: "Detectives in Newham borough are investigating a series of offences involving the monitoring of offenders.
"Police had become aware that offender monitoring equipment was being used inappropriately."
A spokesman for the MoJ said: "Public protection is our priority. We are urgently investigating and working closely with the police."
All 14 suspects have been bailed to dates in early April and inquiries are ongoing, police said.