The basic accusation of the Inquisition was that Jews who converted to Christianity were still secretly Jewish.

The Tribunal of the Holy Office of the Inquisition (Spanish: Tribunal del Santo Oficio de la Inquisición), commonly known as the Spanish Inquisition (Inquisición española), was established in 1478 by Catholic Monarchs Ferdinand II of Aragon and Isabella I of Castile.

It was intended to maintain Catholic orthodoxy in their kingdoms and to replace the Medieval Inquisition, which was under Papal control. It became the most substantive of the three different manifestations of the wider Christian Inquisition along with the Roman Inquisition and Portuguese Inquisition.

The Inquisition was originally intended in large part to ensure the orthodoxy of those who converted from Judaism and Islam. This regulation of the faith of the newly converted was intensified after the royal decrees issued in 1492 and 1501 ordering Jews and Muslims to convert or leave.

The monarchs decided to introduce the Inquisition to Castile to discover and punish crypto-Jews, and requested the pope’s assent. Ferdinand II of Aragon pressured Pope Sixtus IV to agree to an Inquisition controlled by the monarchy by threatening to withdraw military support at a time when the Turks were a threat to Rome. The pope issued a bull to stop the Inquisition but was pressured into withdrawing it. On November 1, 1478, Pope Sixtus IV published the Papal bull, Exigit Sinceras Devotionis Affectus, through which he gave the monarchs exclusive authority to name the inquisitors in their kingdoms.

The Spanish Inquisition had been set up in part to prevent conversos from engaging in Jewish practices, which, as Christians, they were supposed to have given up. However this remedy for securing the orthodoxy of conversos‘ religion was eventually deemed inadequate, since the main justification the monarchy gave for formally expelling all Jews from Spain was the “great harm suffered by Christians (i.e. conversos) from the contact, intercourse and communication which they have with the Jews, who always attempt in various ways to seduce faithful Christians from our Holy Catholic Faith”.

The Alhambra Decree, which ordered the expulsion, was issued in January 1492. Historic accounts of the numbers of Jews who left Spain have varied enormously. Historians of the period give extremely high figures: Juan de Mariana speaks of 800,000 people, and Don Isaac Abravanel of 300,000. Modern estimates, based on careful examination of official documents and population estimates of communities, are much lower: Henry Kamen estimates that, of a population of approximately 80,000 Jews, about one half or 40,000 chose emigration. The Jews of the kingdom of Castile emigrated mainly to Portugal (whence they were expelled in 1497) and to North Africa. However, according to Henry Kamen, the Jews of the kingdom of Aragon, went “to adjacent Christian lands, mainly to Italy”, rather than to Muslim lands as is often assumed.

The Sefardim or Anusim descendants of Spanish Jews gradually migrated throughout Europe and North Africa, where they established communities in many cities. They also went to New Spain, the Ottoman Empire and North America (the American Southwest), Central and South America.

Tens of thousands of Jews were baptised in the three months before the deadline for expulsion, some 40,000 if one accepts the totals given by Kamen: most of these undoubtedly to avoid expulsion, rather than as a sincere change of faith. These conversos were the principal concern of the Inquisition; being suspected of continuing to practice Judaism put them at risk of denunciation and trial.

Peter Hocken writes:

“I realize the depth of the suffering inflicted on the Anussim by the Inquisition. This has to be confessed for the sake of the Catholic Church and the whole Body of Messiah. It is a Catholic responsibility to acknowledge this massive evil, when the Church, through the Pope and the Kings, created a ‘monster’ (the Inquisition) that got out of control. The story of the Inquisition is a story of multiplication of evil and represented the climax of replacement teaching. As a Catholic priest, I am here to express this sorrow and ask for forgiveness from my Jewish brothers. We need to seek guidance from the Holy Spirit of God and let it work in the midst of the Church.”

Prayer: Father, forgive the terrible things that have been done in your name. Cleanse our hearts, and the misdeeds of the past, so that we may know and share the true love you have for us through the Messiah, both for Israel and all nations.

Source

http://en.wikipedia.org/wiki/Spanish_Inquisition#Expulsion_of_Jews_and_repression_of_conversos

See here and here for the confession and act of repentance led by Peter Hocken and Johannes Fichtenbauer