The 23-year-old reality TV star is now said to be facing the axe from the E4 show following the scandal, which apparently took place at a event in Bath, Somerset.
According to The Sun, Matthews was photographed by a partygoer at the event following a nightclub appearance when he is said to have ‘produced a bag of cocaine, grabbed a DVD case and did a line’.
The source told the newspaper: ‘It made me feel really uncomfortable – but he acted like it was the most natural thing in the world.
‘I was disgusted and surprised that he’d do it with people he did not know.’
After allegedly snorting the drug himself, Matthews is then said to have offered it to other partygoers, according to the source.
The Sun also claim that Matthews attempted to buy the photographs before they were made public.
And the scandal looks likely to affect broker Matthews’ future on Made In Chelsea, as he has yet to sign a deal to continue on the hit programme.
A source told the paper: ‘Spencer was about to sign a big deal but this could put a spanner in the works.’
Matthews made no reference to the apparent scandal last night as he attended the London premiere of Zac Efron’s new movie The Lucky One.
MailOnline has contacted Matthews’ spokesperson and a Made In Chelsea spokesperson for comment.
Meanwhile, the E4 show was announced today as nominated for a Bafta at the forthcoming TV awards.
Made In Chelsea will go up against An Idiot Abroad, Don’t Tell The Bride and The Young Apprentice for Best Reality & Constructed.