The US government reportedly bought about $2 million worth of software from a Russian developer that also worked with Russian security agencies.
The software was purchased by agencies, including the Department of Defense, Secret Service and Department of Homeland Security, The New York Times reported. Two executives of Virginia-based Oxygen Forensics have been accused of hiding the company’s true origins and ownership while selling its products, federal prosecutors said in a statement Wednesday.
The Justice Department said that there was no evidence that the software contained malware or was used to access government systems illegally. However, the case has raised concerns about company ownership, transparency and possible national security risks.
The development comes after the Trump administration removed some reporting requirements for private companies. These rules were designed to help authorities identify shell companies used for money laundering and sanctions evasion.
The US Treasury Department said that it would permanently stop collecting ownership information from private US companies. Treasury Secretary Scott Bessent said that the change would reduce paperwork for millions of law-abiding business owners while protecting national security, The NYT report stated.
When the report about the Russian linked firm surfaced, the White declined to comment on the issue. It directed questions to the Justice Department.
Origins of Oxygen Forensics:
Lee Reiber, the 55-year-old CEO of Oxygen Forensics, and Oleg Davydov, 52, a Russian co-founder and software developer, were arrested this week following the incident. Reiber was arrested in Idaho and released on bond after appearing in court.
He is expected to face charges in Los Angeles. Davydov was arrested in London while preparing to fly to Turkey. The US officials are planning to seek his extradition, as per the report.
As per the US officials, since 2022, the two executives and several other unnamed Russian shareholders intentionally conspired to obtain contracts from federal agencies while hiding the true ownership of the firm.
They alleged that the company made false representations that government procurement agents relied on. Additionally, employees and shareholders took steps to hide the fact that the software development team was in Russia.
Following the Russian-Ukrainian war, as the US imposed sanctions on Russian companies, Davydov’s name was removed from the American business’s corporate filings.
Additionally, the Russian company changed its name from Oxygen Software to MKO-Systems. Reiber was then named CEO and the company’s charter was amended “so that, in the words of one shareholder, ‘fateful decisions’ would continue to be made” by them in Russia without losing US business opportunities, the US agent, investigating the complaint, noted.
The Department of Homeland Security, Secret Service and Department of Defence bought software from Oxygen Forensics after CEO Lee Reiber said the company was American-owned and developed. However, prosecutors say that the US company was actually controlled by Russian owners through a Cyprus-based shell company. Additionally, Russian developers worked on the software and the company also had Russian government and security agencies as customers.
Prosecutors have seized bank accounts, internet domains and digital systems linked to the alleged scheme.
