SEATTLE/SAN FRANCISCO (Reuters) - Seeking to deliver a blunt warning to hackers everywhere, U.S. officials on Friday arrested a teenager who admitted to making a copycat version of the Blaster Internet worm that infected computers around the world.

Jeffrey Lee Parson, 18, was arrested in his hometown, the Minneapolis suburb of Hopkins, and charged with one count of intentionally causing or attempting to cause damage to a computer. He faces a maximum of 10 years in prison and a $250,000 fine if convicted.

"With this arrest we want to deliver a message to hackers around the world," John McKay, U.S. Attorney for the Western District of Washington, told reporters at a news conference shortly after the Minnesota arrest.

"The handcuffs were not cyber-handcuffs, they were real handcuffs," McKay said, speaking of Parson's arrest, which was the result of a joint investigation by the U.S. Secret Service and the Federal Bureau of Investigation.

The 6-foot-4-inches (193-cm) tall Parson, who weighs 320 pounds (145 kg), appeared in U.S. Federal Court in St. Paul wearing a faded gray T-shirt with "Big Daddy" spelled out on the front, as well as cargo shorts and high-top sneakers.

U.S. Magistrate Judge Susan Nelson ordered Parson to be held under house arrest, although government lawyers had argued for keeping Parson in jail, based on the "grievous and substantial" harm he had caused computer users.

Parson was banned from using the Internet, surfing the World Wide Web or using messaging services. She also told Parson there had been threats made against him and she was concerned for his safety.

The suspect had previously admitted to law enforcement officials that he created a variant of the worm, according to a complaint filed in the Western District of Washington state. Parson's next court hearing will be Sept. 17 in Seattle.

The Blaster worm exploited a flaw in Microsoft Corp.'s Windows software that was made public last month. Engineers and lawyers at Microsoft, which is headquartered in Redmond, Washington, 15 miles outside of Seattle, cooperated with authorities in the case.

MODIFIED BLASTER

As experts combed over data in the hunt for the creator of the original virus, which Microsoft said had caused it "millions of dollars of damages," authorities detailed in the complaint how Parsons created the worm variant.

Parson admitted modifying Blaster and creating a variant known by different names, including "W32/Lovesan.worm.b" and admitted he renamed the original code, dubbed "MSBlast.exe," "teekids.exe" after his online alias, the complaint said.

FBI agents interviewed Parson when they searched his home on Aug. 19 and seized seven computers.

Blaster, which appeared Aug. 11, and its variants are self-replicating Internet worms that bore through a Windows security hole, harnessing computers to launch concerted data attacks via the Internet on a Microsoft technical service Web site.

At least 7,000 "drone" computers tried to attack the Microsoft Web site, the complaint said. Microsoft thwarted the attacks by disconnecting the Web address from the Internet.

The Internet addresses of infected computers were sent to the t33kid.com Web site. That site was traced back to Parson through a third party, according to the complaint.

The t33kid.com site is registered to Parson at an address in Hopkins, Minnesota. A phone number at that address is registered to R. Parson. A woman who answered the telephone there declined to comment.

Mark Rasch, former head of the Justic Department's computer crime unit, now chief security counsel at Solutionary Inc., a managed computer security company, said he thinks Parson will serve time "because of the amount of damage resulting from the worm."

Meanwhile, anti-virus vendor Trend Micro Inc. said another worm had surfaced that takes advantage of the Windows hole Blaster used, but the new worm was rated low risk with few infections. (Additional reporting by Eric Auchard in New York, Bernhard

Warner in London, Deborah Charles in Washington, D.C., Daniel Sorid in San Francisco, and Andy Stern in Chicago)