The New Black Markets

4 May

Almost three months ago, Ross Ulbrict was convicted in federal court of being the mastermind behind the billion-dollar online black market Silk Road. The bust, and the subsequent seizure of Silk Road 2.0 might lead some to think Internet black markets have taken a hit, but the truth couldn’t be further away: Internet black markets are booming.

Its been over two years since the FBI shut down Silk Road, only one of a number of growing online bazaars that let users sell all kinds of illicit goods and services – basically functioning as eBay for all things illegal.

It didn’t take long for Silk Road to become the king of the Internet black markets behind media coverage that led to buzz and simple word of mouth. Silk Road rose to prominence and according to the FBI, up to its seizure; over 1.2 million transactions took place totaling $1.2 billion in revenue and over $80 million going straight to the Silk Road in commissions.

It didn’t take long for other sites to take the reigns once Silk Road was shut down; quickly reaching heights that Silk Road never imagined.

Evolution was the first to take the upper hand in the marketplace for months, becoming the largest black market of all time and accounting for nearly half of all Internet black market drug sales. The site also sold credit cards and weapons.

“They changed the business model by bringing together illegal drugs with stolen credit cards, personal information, and even deadly weapons on a scale that no one had seen before,” said Dan Palumbo, Research Director for the Digital Citizens Alliance in a press release. “Evolution also upped the bar for all the drug sites with a more efficient, streamlined user experience. The site was easier to navigate than any of the previous incarnations of Silk Road and other competitors.”

For all the success Evolution found, it soon revealed the dangers of doing business through black market sites. In March, Evolution mysteriously vanished. Rumors are that the site shut down abruptly to take to steal user’s money held in escrow.

In the wake of black market giants Silk Road and Evolution, Agora has now taken the reigns of supremacy. According to the Digital Citizens Alliance, they have over one-third of the black market share. Most of the growth since the death of Evolution which had half of the market share, however, has spread to multiple black markets.

“Instead of a large amount of growth concentrated among two or three central players like we have seen in the past, our research shows that the wealth is being spread,” said the Digital Citizens Alliance. “We’ve seen 7-8 sites experience significant growth over the last month.”

The Digital Citizens Alliance also points out that since the seizure of Silk Road 2.0 and its predecessor Silk Road that online black market usage has raised dramatically.

Governments around the world are working hard to put the lid back on Pandora’s Box. The FBI, DEA, and NSA are all attempting to bring down the endless list of these illicit bazaars with both traditional investigation techniques as well as high-tech techniques.

Silk Road was ultimately brought down when federal agents located weaknesses in the computer code that allowed them to locate the market’s servers. Law enforcement then seized the servers and had all the evidence they needed.

“These arrests send a clear message to criminals: The hidden Internet isn’t hidden, and your anonymous activity isn’t anonymous,” said Keith Bristow, Director of Britain’s National Crime Agency, after the arrest of four men on drug offenses. “We know where you are, what you are doing and we will catch you.”

In reality, agencies are struggling to fight the rapid expansion of illegal transactions on Internet black markets because they function in a landscape of nearly total anonymity called the Deep Web.

The Deep Web is the hidden portion of the World Wide Web that cannot be accessed by your run of the mill Web browser because the sites in the Deep Web are not indexed on search engines. For this reason, users interested in accessing the invisible parts of the Web must use Tor.

Tor is a software and Web browser that allows users surf the Web anonymously by concealing their usage and location from surveillance and traffic analysis. It was initially developed by the Navy Research Lab to hide military communications but is now being maintained by a non-profit.

In an NSA Top Secret document obtained by Edward Snowden, Tor was called “the King of high-secure, low-latency Internet anonymity.”

Tor along with Bitcoin, a crypto-currency that allows near anonymous digital transactions; and encryption technologies such as PGP make it almost impossible to trace the transactions and communications of users on Deep Web black markets.

In an interview with USA Today, FBI Agent Christopher Tarbell of the FBI’s cyber-crime unit in New York called Silk Road “the most sophisticated and extensive criminal marketplace on the Internet today.”

The NSA has also argued that terrorists are making the most out of these anonymous technologies and have sought to undermine them.

“The Intelligence Community’s interest in online anonymity services and other online communication and networking tools is based on the undeniable fact that these are tools our adversaries use to communicate and coordinate attacks against the United States and our allies,” said James Clapper, the Director of National Intelligence.

The Deep Web is home to all sorts of illicit activity from child pornography to weapons, but not everyone see just the negative aspects of this extreme anonymity.

Many have argued that Tor and encryption technologies play a vital role in protecting privacy. Here is how the Electronic Frontier Foundation puts it:

“Everyone needs privacy sometimes! For example: perhaps you end up with an      embarrassing medical condition and you want to search for information about it but you don’t want Google and every advertiser to know about your bodily functions. Tor can help you keep that information private. Tor can also help prevent online tracking more generally as well. Proper use of Tor can circumvent most third party trackers that governments and corporations can use to track your browsing habits and send you obnoxious intrusive advertisements. Tor can also protect your data from hackers on your network. Tor can also help you get around censorship and firewalls from the filter at your school or office or even help you circumvent firewalls or censorship put in place by your government.”

Others like Glenn Greenwald have pointed out that Tor and encryption are necessary for journalists so they can communicate sensitive information with their sources.

Some even see the explosion of the drug trade granted by anonymity in online black markets as a good thing and a safer alternative to the on the streets drug trade.

“[Ulbrict] created a site (Silk Road) that helped bring more intelligence, more freedom, more consumer awareness, more harm reduction, and more peace to the sometimes dangerous process of drug buying,” said Brian Doherty in a column for Reason. “If you delve into the world of Silk Road forums and fans, talk to some of its users, study the academic work on it, you realize Silk Road was a place that helped eliminate fear, uncertainty and danger; that made quality and customer satisfaction a more powerful incentive to succeed in drug dealing than violent defense of turf or money.”

Ulbrict also carried this sensibility and it was at least part of the reason that he created Silk Road. In his frequent screeds on the Silk Road forums, he talked about his libertarian leanings and dissatisfaction with the Drug War.

Ulbrict faces sentencing on May 15 on seven counts. Three of the charges are for aiding drug distribution and another is for conspiracy to run a criminal enterprise. The last three are for computer hacking, distributing false identification, and money laundering. The prosecution also claimed that six people died from overdose on drugs bought off Silk Road.

Ulbrict’s defense recently applied for a retrial after two law enforcement agents working on the Silk Road case were charged with corruption. The retrial was denied.

“The charges include blackmailing Ulbricht and stealing hundreds of thousands of dollars of the site’s bitcoins,” according to an Andy Greenberg in his Wired article. “But now the judge in the case has made it clear that neither those new corruption charges nor a pile of other complaints from Ulbricht’s defense is going to win Silk Road’s creator a second chance at freedom.”

Regardless of Ulbrict’s ultimate sentence, the wildfire that is online black markets appears here to stay.

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