In short, they believed he was a spy working for the OSS (the precursor to the CIA).

Wallenberg's mission to Budapest was a result of the efforts of the War Refugee Board (WRB), and American organization set up by President Roosevelt to extend help to European civilians suffering under Nazi rule, particularly Jews. The WRB raised money and sent it to organizations that could help. One of the most prominent was Count Bernadotte, a member of the Swedish royal family and a member of the International Committee of the Red Cross. Bernadotte recruited Wallenberg to go to Hungary and aid the Jews there. The funds that Wallenberg used during his mission came to him from the WRB via Sweden. Thus, when the Soviets captured Budapest, they knew that a non-Hungarian was operating effectively under the nose of the local authorities, and using western (American) money to do so. He also had contact with local resistance groups. The Soviets assumed he was an OSS agent and had him arrested and "disappeared."

There is some indication that Wallenberg had connections to the OSS (or with OSS operatives), but to my knowledge it has never been proven that he was working directly with any intelligence agency.

Further reading: Per Anger, With Raoul Wallenberg in Budapest; Timothy Bent (ed), Raoul Wallenberg: Letters and Dispatches 1924-1944; Sharon Linnea, "Raoul Wallenberg: The Man Who Stopped Death; Paul Levine, Raoul Wallenberg in Budapest: Myth, History, and Holocaust; and Alex Kershaw, The Envoy.