Sources within Paragon City say that Arachnos led to Mussolini's success in Italy, and also to his downfall. Arachnos earliest known leader was a man simply known as "The Weaver".
After Stefan Richter, an Austrian-American technocrat, came across super-human powers in 1931, he became a member of Arachnos. He worked his way up the ranks and was put in charge of the Paragon City division, The Web, which is somewhere in the Perez Park area of Paragon. He assumed the name "Recluse" as a cover for his real identity. When his powers had fully developed he took to calling himself Lord Recluse.
After a defeat from his arch-nemesis, Statesman and his Freedom Phalanx, Lord Recluse fled to Etoile Islands. This minor set back only fueled his ambition, as Lord Recluse eventually usurped the leadership of Arachnos and took command. Under Lord Recluse's control, he altered Arachnos' prerogatives and interests. As their new leader weaved his web of manipulation and deceit, the changes implemented enabled Arachnos to grow exponentially to the point where they finally emerged as the "legitimate" leader of the Rogue Isles.
Technically ruling a nation, Lord Recluse can be regarded as a political figure and has been given sanction to create his own armed forces, an armed forces that he has molded into his own form. Other allowances include the purchase of military hardware and even research new technologies including alien.
Since their emergence, Arachnos have continued to swell their army and ranks of super power villains. One of their many objectives is to capture Paragon City, but with her heavily protected by The Statesman, the Freedom Phalanx and numerous super heroes, many believe this to be folly and more of a personal objective for Lord Recluse. Nevertheless with Arachnos' every growing army, arsenal and Lord Recluse as their leader, it could be less far fetched as it sounds.