The Fighter director was said to be attached to helm the project from scriptwriter Eric Warren Singer (The International), according to The Hollywood Reporter.
American Bulls**t centres around the real life FBI undercover sting operation of Congress called Abscam, which was set up by "the world's greatest con man".
The crime drama is set to be produced by Atlas Entertainment's Charles Roven and Richard Suckle.
However, O Russell's representatives have reportedly dismissed his involvement, saying that he has not been approached.
Christian Bale was also named as a potential lead in the movie, but this was also denied by O Russell's representatives, reports Deadline.
The director was accused of groping his transgender niece earlier this year.
> David O Russell 'testing actresses for new film'