West Midlands Police have joined a nationwide investigation into the 200-strong group, operating under the title Gentlemen Without An Interesting Name (GWAIN).
The underground organisation has been formed by members of the notoriousPaedophile Information Exchange (PIE), which campaigned for sex with children to be legalised.
Midland school teacher Tom O'Carroll - later dismissed from his Leicester school - spearheaded PIE as chairman, canvassing child molesters to boost membership.
The latest alert comes weeks after the release from prison of Lennie Smith - dubbed one of Britain's most dangerous men. The violent paedophile worked in Birmingham as a rent boy.
Police believed they had smashed PIE after a string of high-profile prosecutions - including five Midland men - ending in 1984.
But they always feared that the group would reappear under a new title.
Detectives have warned that GWAIN is even more dangerous than the original gang because of their extremely advanced knowledge of technology.
A high-ranking police source said: "Their knowledge of computers is so sophisticated that they are using codes which are up to military standards."
The group is also highly organised and has a better understanding of the laws against child sex.
Members include a university lecturer, teachers, clergymen and other professionals.
They hold clandestine meetings at homes and run a worldwide e-mail network known as the "berrylist".
The Children's Society spokesman Tim Linehan told the Sunday Mercury: "Typically paedophiles will deny the fact that what they do is abuse.
"They are living in a bizarre fantasy world and they need to meet other people in groups like GWAIN to keep up this dangerous lie.
"They will exploit any new outlet which is available, especially something like the Internet and e-mail.
"The formation of GWAIN is extremely worrying because it just reinforces this fantasy world which degrades and destroys children."
WPC Nicky Godden, of the West Midlands Police's Paedophile and Pornography Unit, said forces around the country were now working on the GWAIN case.
But she added: "We are not currently acting on any specific inquiries."
Yes PIE reformed and surprise nothing was done to stop the lucrative child porn network.