Hermitage Capital founder Bill Browder was arrested by Spanish police Wednesday on an Interpol arrest warrant issued by Russian Federation but was released a couple of hours later.
The Russians have repeatedly tried to get Interpol to issue an arrest warrant for Browder.
Spanish authorities confirmed that the anti-corruption activist was arrested in Madrid, but had since been released.
In December, Browder was sentenced in Russian Federation to 9 years in prison after he was found guilty in absentia for deliberate bankruptcy and tax evasion.
Browder successfully lobbied Congress to pass the Magnitsky Act in 2012, which imposes sanctions on Russian individuals believed to be implicated in Magnitsky's murder.
The U.S. -born British businessman tweeted that Spanish police had arrested him on a Russian Interpol warrant.
Browder also posted a photo of himself in the back of a police van but a police spokesman could not immediately confirm the arrest.
But police later told AFP he had been released when they realised the "warrant" had expired.
Mr Browder, a US-born British national, claimed this was the sixth time Russian Federation had "abused Interpol" in pursuing him.
The businessman who lobbied USA politicians to impose tough sanctions on Russian officials has been detained by police in Spain following a Russian arrest warrant.
After an hour in custody he was released because the warrant was no longer valid, Spanish police said.
Interpol denied the claim and said, "Mr Browder is not wanted via Interpol channels".
"There is not, and never has been, a Red Notice for Mr Bill Browder", it said in a statement. He renounced his American citizenship in 1998 to avoid having to pay U.S. taxes, and became a British citizen.
Russian Federation has labeled Browder a national security threat, banned him from the country in 2005 and tried him in absentia for tax evasion in 2013.
Browder is the founder of the Hermitage Capital fund, where Sergei Magnitsky had worked as a legal counselor before he died in a pretrial detention facility.
British Foreign Secretary Boris Johnson welcomed Browder's release, tweeting: "Just spoken to Bill Browder - very glad that he has now been released".
Browder - who dismissed the accusations as politically motivated - had previously also been sentenced to nine years in jail in 2013 in a trial alongside Magnitsky, who was posthumously found guilty of tax evasion.