US law enforcement authorities have shut down Silk Road, an online marketplace used to buy and sell illegal drugs such as heroin, cocaine and meth amphetamine.
The Federal Bureau of Investigation arrested Silk Road owner, Ross William Ulbricht, 29, known online as "Dread Pirate Roberts," in San Francisco,according to court filings.
Mr Ulbricht, who holds an advanced degree in chemical engineering, appeared in federal court and a bail hearing was set for tomorrow.
His lawyer Brandon LeBlanc, a public defender, declined to comment.
Federal prosecutors in New York charged Mr Ulbricht with one count each of narcotics trafficking conspiracy, computer hacking conspiracy and money laundering conspiracy, the filing said.
"Silk Road has emerged as the most sophisticated and extensive criminal marketplace on the Internet today," FBI agent Christopher Tarbell said in the criminal complaint.
The site was used by "several thousand drug dealers" to sell "hundreds of kilograms of illegal drugs," he said.
The site, which has operated since early 2011, also offered tutorials on hacking ATM machines, contact lists for black market connections and counterfeiters, and guns and hit men for sale, according to the charges.
More than 900,000 registered users of the site bought and sold drugs using the digital currency Bitcoin.
In recent media reports about the growing popularity of Bitcoin, the Silk Road website has emerged as part of a darker side to the use of digital currencies.
Through the site, according to the charges, users could buy drugs and have them shipped to an address.
Investigators, posing as regular users on Silk Road, made more than 100 purchases of drugs, which were shipped to the New York area.
According to the complaint, Mr Ulbricht, who shortened his alias from Dread Pirate Roberts to DPR when posting on Silk Road's forums, operated the site from San Francisco.
At times, he used computers at Internet cafes to access the servers running the website, which employed several technological tools to mask the location of its servers and the identities of its administrators and users.
The complaint described other aspects of Ulbricht's online presence: In a Google+ profile, he described himself as a fan of libertarian economic philosophy and posted videos from the Ludwig von Mises Institute, an Auburn, Alabama-based economics institute.
The bitcoin, valued by many for its anonymity, fell to $129 from over $140 a day before following the arrests, according to a website for trading bitcoins.
Earlier, the currency traded as low as $110.