Liberty Reserve - a Costa Rican-based digital currency service - has been shut down after the reported arrest of its founder.
Authorities in the Central American country said Arthur Budovsky had been taken into custody in Spain on suspicion of money laundering, following an investigation which also involved the US.
They added that police had raided several of Mr Budovsky's properties and seized his computer servers.
The site went offline on Thursday.
Liberty Reserve had described itself as being the internet's "oldest, safest and most popular payment processor... serving millions all around a world".
It had allowed users to open accounts and transfer money, only requiring them to provide a name, date of birth and an email address.
Cash could be put into the service using a credit card, bank wire, postal money order or other money transfer service. It was then "converted" into one of the firm's own currencies - mirroring either the Euro or US dollar - at which point it could be transferred to another account holder who could then extract the funds.
The service promised that payment transfers were "instantaneous" and it charged a maximum of $2.99 (£1.98) for each transaction. It also offered a private messaging facility which it said was "much more private and secure than email or instant messenger services".
Security expert Bryan Krebs said Liberty Reserve's features had made it a popular among cybercriminals who wanted to move funds and make payments anonymously.
However, others said they had used the service for legitimate means, viewing it as a cheaper alternative to PayPal. They fear they will now lose money still sitting in its accounts.
Costa Rica state prosecutor Jose Pablo Gonzalez announced news of the raids on Saturday. He said that in addition to Mr Budovsky's arrest, 10 other suspects were being investigated in connection with international money laundering.
Mr Gonzalez said that Costa Rica's financial regulator, Sugef, had refused to issue a licence to Liberty Reserve in 2011 after raising concerns about how it was being funded.
Although the company Liberty Reserve subsequently closed and dismissed its employees, the prosecutor said Mr Budovsky had continued operating his money exchange service by running it through five other Costa Rican businesses.
The same year, he said, New York based officials asked Costa Rica to investigate.
Mr Gonzalez said offices and houses linked to Mr Budovsky had been raided last week, and that documents and three vehicles - including a Rolls Royce - were seized.
The US Department of Justice's website says that in 2006 Mr Budovsky was found guilty of operating a separate illegal money transmittal business - GoldAge - from a Brooklyn apartment when he used to live in New York.
However, when asked about the latest arrest, a spokeswoman said she could "not provide any guidance" at this time.
The BBC has also asked the Spanish police for more details.
According to Mr Krebs' security blog, the closure of Liberty Reserve has the potential to "cause a major upheaval in the cybercrime economy".
He said there had been "anxious discussions" about the news on several internet forums after fraudsters and malware sellers found themselves unable to access their accounts.
But others say they used the service for legitimate reasons, and are concerned about the lack of information.
They include Mitver Holdings, the firm behind a facility called ePay Cards. This allows consumers outside the US to buy goods from stores in the country as if they owned a locally-issued Visa or Mastercard credit card.
The company - which has offices in London and Texas - used Liberty Reserve as a way for its customers to charge up their "virtual credit cards".
Co-founder Mitchell Rossetti said he had about $28,000 sitting in his business's Liberty Reserve account at the time the site went offline.
"We used Liberty Reserve because it was quick, efficient and secure," he told the BBC.
"Now, we - and thousands of others who were dependent on it - have been left with nothing to look at except a blank webpage, and nothing more to go on than reports from the Costa Rican press.
"We need to know if our assets have been seized and what would be the requirements to get the funds returned."