U.S. federal agencies purchased $2 million of software from Oxygen Forensics on Wednesday, a Virginia‑based company that prosecutors say is controlled by Russian owners through a Cyprus shell.
The software was sold to the Department of Defense, Secret Service and DHS, all of whom relied on the company's claim that it was American‑owned and developed.
Oxygen's CEO Lee Reiber was arrested in Idaho and released on bond after a court appearance, while co‑founder Oleg Davydov was detained in London and faces extradition to the U.S.
Prosecutors allege the firm hid Russian government clients and that developers in Moscow built the product, violating U.S. sanctions and procurement rules.
The Justice Department said no malware was found, but the case has raised concerns about shell companies and the Treasury's decision to stop collecting ownership data.
The agency will pursue extradition of Davydov and file charges in Los Angeles, while the Treasury will review its new policy on ownership disclosure.