Online betting site Blue Square has been attacked by criminals threatening to e-mail out child pornography in its name unless it pays 7000 euros (£4,863).
The web attacks can stop punters using betting sites
Extortionists have already threatened gambling sites with "denial of service" attacks, which make sites inaccessible through multiple information requests.
But after a five-hour online attack this week, blackmailers phoned Blue Square to make the child porn threat.
UK computer crime investigators have called it a "sinister development".
The normal operating method of the cyber criminals is to bombard websites, and thus paralyse them and halt trading, by sending thousands of false requests for information to them.
While an attack is under way it can make it impossible for the public to access the sites.
DDoS ATTACK EXPLAINED
DDoS = Distributed Denial of Service attack
Malicious hacker uses virus to hijack numerous computers
On command these 'zombie computers' flood the targeted website with useless data and requests for information
The target's internet servers are overwhelmed by junk messages
Customers have trouble using the targeted website
Targeted website can be slow or inaccessible for days
Fighting attacks can be laborious and costly
Because the 'zombies' are 'distributed' across the internet, finding the attacker can be hard
On Monday, Blue Square was sent an initial blackmailing e-mail from an internet address in Serbia.
It read: "You have time until 5pm your local time. I will now start an attack for one hour. This will be 1/20 of the power I can do."
It went on to demand that 7000 euros was paid into an account.
Blue Square repelled the computer attack, and a man with an Eastern European accent phoned the firm's IT director in London on Tuesday.
He threatened to send out child pornography e-mails in the company's name, unless the money was paid within two days.
"This is a new twist on the standard 'distributed denial of service' attack," Ed Pownall, communications officer at Blue Square, told BBC News.
"Because we can now repel their online attacks so quickly this is obviously an attempt to ramp up the intimidation. It is just revolting.
"We are a quoted company - how could we ever explain to shareholders we had paid out to extortionists? Not that we would ever consider paying blackmailers in any circumstances.
"We have decided to go public so that if people do receive one of these e-mails they know it is not from us."
After a spate of attacks in March and April this year, bookmakers have become increasingly successful in fending off attacks.
They have used technology to spot and stop data barrages before they hit web servers.
And they have simply cut off an inquiries to their website from the region where the computer attack is thought to originate - which in this latest Blue Square incident is South America.
"We are pretty confident their computer is based there," said Mr Pownall.
"When we cut out access from that part of the world the attack stopped."
This summer, the UK Hi-Tech Crime Unit, together with their Russian counterparts, arrested the heads of a suspected blackmail gang in Russia.
The British team is now investigating this new type of extortion.
"Two sites have come under 'distributed denial of service' attacks this week, Blue Square, and William Hill," a spokesman for the UK's Hi-Tech Crime Unit told BBC News.
"However, Blue Square then received a follow-up phone call making the child pornography threat.
"This is a new type of extortion demand and is a sinister development.
"Criminals have previously used technology to attack company websites, to try and extort money.
"But this is a new approach and something we are taking very seriously. An operation into the incident is ongoing."