Microsoft says it has settled a computer-fraud case against a website operated by a Chinese businessman that had become a major hub for illicit Internet activity.     

The software company announced Tuesday that Peng Yong, the registered owner of 3322.org, has agreed to work with Microsoft and China's computer emergency response team to prevent cybercriminals from using the domain. 3322.org served as home base for the Nitol botnet and more than 500 other types of malware, Microsoft officials said in documents filed in federal court last month.

Peng will steer any infected traffic from 3322.org to a special computer called a sinkhole that will be managed by Chinese authorities, according to the agreement.

Peng initially denied the allegations in the lawsuit, which Microsoft said it dropped after reaching the settlement.