The Russian music site Allofmp3.com has denied that a man arrested for allegedly selling download vouchers was a member of its staff.

The 25-year-old was questioned earlier this month after a raid in London by police acting under a section of the Fraud Act 2006 designed to combat online fraud.

He was accused of selling on web auction sites £10 vouchers containing a code providing access to illegal Allofmp3 downloads, according to a statement by the International Federation of Phonographic Industry (IFPI).

It said: "The suspect was believed to be taking payment from European customers and transferring the cash into various offshore accounts operated by the site's Russian owners."

The scheme appeared to be an attempt to get round a block by Paypal and major credit card companies on payment facilities for Allofmp3.com.

The IFPI said the site falsely claimed to pay royalties on tracks, enabling it to undercut legitimate services such as iTunes, Napster 2.0 and HMV Digital.

Allofmp3 said in a heavily sarcastic statement that it had been surprised to discover from news reports that it had a European office.

The statement went on: "[We] never had any activities outside Russia. Thus we do not have any offices or employees abroad. Allofmp3 operates in full compliance with Russian legislation and pays the necessary royalties to the rightholders and authors.

"The members of the IFPI are unable to do anything about the natural crisis the music industry faces in the digital era. Instead they engage in unfair competition practices and political lobbying. They make up 'sensational' news to attract public attention to their activity which becomes less and less valid every day.

"The recent actions against online music stores are connected to the considerable decrease in CD sales (50 per cent in some European countries according to www.ifpi.org). The majors are trying to keep their super profits by any means. They block the natural transition from outdated physical media to newer means of delivering music to the consumer."

It claimed the IFPI and its UK ally, the BPI, "turned a person reselling gift certificates into a 'European office of Allofmp3' in London. After that they initiated the loud 'closure' of this 'office' and an arrest of its mythical 'employee'. The young Londoner is a victim of music majors fighting the irreversible technological progress."

The arrested man is on bail and has not been charged.