Jennifer Arcuri joined the Prime Minister when he was London Mayor on various overseas trade ventures. Downing Street has refused to comment on the allegations. Ms Arcuri allegedly rented an apartment just minutes away from City Hall in Shoreditch, east London, where Mr Johnson frequently visited.
The model arrived in the UK from California as a business student in 2011.
She first met Mr Johnson after she volunteered to work on his 2012 re-election campaign.
During her time working for Mr Johnson, she regularly documented her life on social media which included snaps of her and the London Mayor on a double decker bus.
The pair then managed to forge a personal and professional friendship.
The former model received a £15,000 Government grant two years after she launched her company, Innotech, in 2012.
Mr Johnson allegedly spoke at events to promote her firm.
Mr Johnson’s office also granted the businesswoman two sponsorship deals which were worth more than £10,000.
He also asked her to join him on three overseas taxpayer-funded overseas trips.
Her latest company managed to win a £100,000 grant from the Department for Digital, Culture, Media and Sport (DCMS) earlier this year, despite the grant being intended for English businesses.
The department is now investigating as to how she got the award if her she lived in California.
It emerged that the company was registered at a UK address in Cheshire which he then used on the grant application form.
According to accounts, Ms Arcuri’s two companies have lost more than £1million.
The owner of the Shoreditch building where Ms Arcuri lived, Chandan Daryanani said she told him that Mr Johnson was a frequent visitor but also “one of her best friends”.
Labour’s Shadow Minister for the Cabinet Office, Jon Trickett said Mr Johnson should provide full details for the allegations.
He said: “Boris Johnson must now give a full account of his actions in response to these grave and most serious allegations of the misuse use of public money in his former role as mayor of London.”
Labour leader Jeremy Corbyn called the allegations an “abuse of power”.
He tweeted: “There was something important in one of the Sunday papers today about an alleged abuse of power by Boris Johnson.”
Ms Arcuri said of the allegations: “Any grants received by my companies and any trade mission I joined were purely in respect of my role as a legitimate businesswoman.”