“Latin America is an important market for us.” – Sergey Brin in Google’s Q2 earnings call.

Those words seems sort of unfortunate, if not funny, given yesterday’s news that Brazilians have been using Google’s social networking service Orkut as a way to manage drug deals.

Ten people were arrested yesterday in Brazil on charges of selling drugs via Google’s Orkut, which is hugely popular in Latin America (Brazilians make up more than half its membership).

Investigators first learned of the drug ring via phone taps and escalated the investigation to include monitoring of activities on the internet. The ring was mainly involved in the trafficking of ectasy and marijuana.

This isn’t the only legal woe for Orkut. Last year the former employer of the Google engineer for whom the product is named, Orkut Buyukkokten (translates to: man of many consonants), sued Google over charges that Buyukkokten ripped off the company’s source code in the building of Orkut. The lawsuit is still in pre-trial motions.

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