Demonoid was recently listed on The Notorious Markets List - a US government document marking the web services that "merit further investigation for possible intellectual property rights infringements".
Also on the list was The Pirate Bay, the filesharing site recently blocked by UK internet service providers, and Megaupload, which was closed down by US authorities earlier in the year and charged with mass copyright piracy.
In the document, Demonoid was described as being "recently ranked among the top 600 websites in global traffic and the top 300 in US traffic".
The Ukrainian ministry of Internal Affairs sanctioned the raid on the data centre that was hosting the site services last week.
Users were said to have become first aware of the action on July 26 when attempts to access Demonoid were met with a "server busy" message.
The action is being viewed as significant as it took place outside the US and western Europe. Many services accused of copyright piracy locate their servers in Eastern Europe or Russia in order to avoid the attention of authorities.
A source within the Interior Ministry told local news agency Kommersant that the raid on Demonoid was timed to coincide with deputy prime minister Valery Khoroshkovsky's visit to the United States to discuss a number of issues, including copyright infringement.
TorrentFreak reports that Ukraine's Division of Economic Crimes conducted the raid after they received a request from the Interpol cross-border police agency.
Local agents contacted Demonoid's ISP, ColoCall, and ordered it to drop the service and allow investigators to pull data from the servers.
"Investigators have copied all the information from the servers Demonoid and sealed them," an anonymous ColoCall source told Kommersant.
The raid was preceded by a distributed denial of service (DDOS) attack on the site and a hacking attack - but it is unclear whether these were linked to actions by authorities.
ColoCall commercial director Peter Vlasenko claimed that his firm repeatedly warned Demonoid over the complaints being made against it.
He said ColoCall also advised that it may have to end its relationship with the site if the problems continued. This scenario eventually came about last week.
TorrentFreak found that the action followed the arrest of one of Demonoid's administrators in Mexico last year over copyright violation.
"In Mexico a criminal case against the owners of Demonoid has been initiated and the tracker is charged with intellectual property rights violations," said Sergei Burlakov, of Ukraine's Ministry of Internal Affairs.
It is thought that the owners of Demonoid could now be the subject of a criminal investigation and prosecution in Mexico.
Speaking to BBC News, TorrentFreak's editor Ernesto Van Der Sar said that Demonoid had been known for featuring links to some "relatively rare content", which could now be harder to find.
However, he feels that the action by authorities may not mean the end of the torrent site.
"In 2006, The Pirate Bay came back online three days after it was raided, and in the years that followed it grew out to become the largest BitTorrent site," he said.