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Exit scams and regulations disrupt global darknet markets

milaeryomina

Recent exit scams have displaced the users of darknet markets, with Eastern European-only platform Hydra now the largest worldwide.

A report published by blockchain forensics firm CipherTrace has detailed significant disruptions to the clandestine darknet marketplace sector following a spate of exit scams during recent months. 

Despite opportunities for new marketplaces to capture the users of the now-defunct platforms, CipherTrace notes the absence of a single platform dominating Western volume. It estimates that the Russian-focussed Hydra market is now the largest worldwide.

Hydra is estimated to have generated more than $1.2 billion in revenue between June 2019 and July 2020 despite exclusively servicing the Eastern European region.

While darknet marketplaces have historically been dominated by a small number of large players, CipherTrace reports the sector now appears to comprise a greater number of platforms commanding smaller respective user bases. The outfit is “currently monitoring over 35 active darknet markets.

The landscape has changed rapidly. Empire Market, a major darknet market launched in February 2018 that had attracted more than one million users as of January this year, went offline in August, abruptly disappearing with roughly $30 million of its users’ funds.

Many of the platform’s users quickly migrated to other marketplaces, Icarus Markets among the notable beneficiaries, but it also vanished within three weeks of Empire’s exit scam. CipherTrace believes Icarus’ exit was not planned, noting the platform “had been pushing high effort updates” shortly before going offline:

“It's probable that the large influx of new users from Empire and their deposits made Icarus ripe for a profitable exit. As a result, the admins may have taken advantage of the opportunity and exited sooner than they had originally planned.”

CipherTrace noted that DeepSea market has been offline for more than one week, suggesting another rug-pull in the absence of an announced seizure from law enforcement. 

The report found that White House Market and DarkMarket are currently the largest platforms operating in the Western world, estimating that each has more than 300,000 users.

While CipherTrace believes White House Market’s user base grew by 50% after the recent exit scams, the platform’s “high security requirements tends to turn the average dark market user away,” and suggested DarkMarket will be preferred among less technologically-savvy users.

The firm also identified two new darknet markets launched during September — Lime Market and Invictus Market, which are believed to be operated by the former admins of DarkBay and Imperiya.

Despite the openings created by the recent exit scams, CipherTrace notes that Invictus’ growth has “slowed drastically” after adding the first 10,000 users, while Lime Market “appears to be a very small market and is not expected become a very notable enterprise.”