District prosecutor and hate crimes specialist Mattias Larsson told the local Skånskan daily that the use of the phrase "I am a nigger" in connection with the auction is a factor under consideration.
"It possibly could be a crime to have dressed up and staged a slave auction before a large group of people and in this way expressed his contempt for a group of people," he said.
Larsson explained that interviews have been conducted with a number of people and expressed a hope that further interviews will be completed soon so that a decision on whether to press charges can be taken "within a couple of months".
The incident, which occurred at student association Halland Nation in April, was reported to the police by the National Afro-Swedish Association (Afrosvenskarnas riksförbund).
"I expect the Swedish legal system to take steps to address this... This would be welcomed very much by the Afro-Swedish community and all people who consider all people to be of equal value and worth," Jallow Momodou at the National Afro-Swedish Association told The Local on Thursday.
A second person under investigation is the Malmö-based artist Dan Parks who is suspected of hate speech after he created a caricature depicting Jallow Momodou in chains and plastered it at public locations in Lund and Malmö.
Momodou told The Local that while some people might cite Parks' right to freedom of expression and find his work funny, to him and to his family the posters remain no laughing matter.
"I don't know if Dan Parks is a racist, but his actions are about as racist as you can get. This won't stay in 2011, this picture of me - not a very nice picture of me - will remain available on the internet for a long time, my grandkids will be able to find it," he said.
The "slave auction" took place on April 16th at a party organised at Halland Nation, which was attended by around 90 people. Three people with blackened faces and ropes around their necks were lead into the hall by a "slave trader".
The "slaves" were then sold during the course of the evening and the party moved on to Helsingkrona Nation.
The "tasteless joke", as it has been referred to, has gripped the attention of civil rights heavy weights around the globe.
The European Network Against Racism (ENAR), based in Brussels, wrote an open letter to Sweden's Minister for Democracy and European Affairs Birgitta Ohlsson expressing its utter disgust and condemnation ‘without reservation’ to the actions, urging the Swedish government to take swift, disciplinary action.
Prominent American civil rights activist Jesse Jackson was also moved to pen a letter to the education minister Jan Björklund urging Sweden to question the perpetrators and take measures to ensure that Swedes are made aware of the brutal reality of the transatlantic slave trade and the part Sweden played in it.
While Lund University in May announced that it would launch a new programme in the autumn term to educate students and staff about the university's core values, the university's disciplinary committee later elected to take no action after reviewing the incident.
Jallow Momodou argued that the committee's decision indicates that Lund University considers the incident to be acceptable and has now placed his faith in the Swedish legal system to address the matter.
"Society has to show that it is not OK to offend people and groups in this way and I expect nothing less from the Swedish society," he told The Local.