Now playing: Watch this: Amazon stops selling Blu phones over spyware worries

Amazon just put budget phone maker Blu in the penalty box.

The online retailing giant told CNET that it was suspending sales of phones from Blu, known for making ultra-cheap Android handsets, due to a "potential security issue."

The move comes after security firm Kryptowire demonstrated last week how software in Blu's phones collected data and sent it to servers in China without alerting people. Blu defended the software, created by a Chinese company called Shanghai Adups Technology, and denied any wrongdoing. A company spokeswoman said at the time it "has several policies in place which take customer privacy and security seriously." She added there had been no breaches.

Blu said it was in a process of review to reinstate the phones at Amazon.

Screenshot by Ben Fox Rubin/CNET

The issue of privacy and how data is collected is a hot topic thanks to a year's worth of reports about Russian hacking and its intrusion into the 2016 presidential race, as well as news in the last few months about ransomware attacks that hijack people's computers, to be unlocked (if you're lucky) for a fee.

Amazon, for one, wasn't taking any chances.

"Because security and privacy of our customers is of the utmost importance, all BLU phone models have been made unavailable for purchase on Amazon.com until the issue is resolved," Amazon said in a statement.

Amazon directed customers to contact Blu's customer support.

Blu may not be a household name like Apple or Samsung, but the company found success selling phones at a fraction of the price of an iPhone. The Blu R1 HD sold for $60, compared with the starting price of $650 for Apple's flagship phone.

Blu was one of the key participants in Amazon's "Prime Exclusive Phones" program, which offered steep discounts on phones to its members in exchange for ads on their lockscreen. Blu is no longer listed on the page.

Blu cited Krytopwire executive Tom Karygiannis as saying the company didn't do anything wrong, although Karygiannis later told CNET that he didn't authorize Blu to make a public statement on his behalf. He confirmed that he spoke to Amazon to give the retailer data on his findings.

Updated at 5:29 a.m. PT: To include a response from Blu.

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