David Martinez reportedly bough the 8-foot by 4-foot piece of fibreboard, covered in drips of brown and yellow paint from David Geffen, the Dreamworks co-founder and entertainment magnate.
Mr Martinez's law firm later issued a statement saying he did not own it.
Version O marks the culmination of the series and has long been considered the most important Picasso in private hands.
A sale shrouded in secrecy and brokered by Sotheby's in 2006.
When Pablo Picasso's masterpiece, Les Femmes d’Alger, sold for 9 million (£116 million) in New York on Monday night, it smashed the record for a painting sold at auction.
However, it is now subject to a legal dispute with Mr Rybolovlev accusing Yves Bouvier, an art dealer, of misleaing him about the price.Picasso created a series of 15 variations of Les femmes d’Alger inspired by the French master Eugene Delacroix who in 1834 had painted The Women of Algiers in their Apartment.