TOULOUSE France (Reuters) - French police have dismantled an illegal Bitcoin exchange and seized 388 virtual currency units worth some 200,000 euros ($272,800) in the first such operation in Europe, a public prosecutor said on Monday.

Two people in the Riviera coastal cities of Cannes and Nice were placed under formal investigation on Friday and detained on suspicion that they operated a website which illegally sold and lent Bitcoins to its users.

During a raid last week on one of the suspects' homes, investigators seized a portfolio of Bitcoins - worth some 9,000 euros per unit - as well as credit cards and computer hardware.

"It's the first time in Europe that a judicial action has resulted in the closure of an illegal exchange for virtual currency," Olivier Caracotch, prosecutor in the southwestern town of Foix where the investigation started, told Reuters.

"It's also the first time in France that Bitcoins have been seized as part of a judicial procedure."

Police were tipped off to the platform's existence by a retired policeman who alerted financial investigators after buying Bitcoins on the site, he said.

The two suspects were being investigated on possible charges of illegal banking, money laundering and illegally operating a gambling website.



(Reporting by Johanna Decorse; Writing by Nicholas Vinocur; Editing by Brian Love and Tom Heneghan)