Monday 28 January 2019

High scores on the dark web

By Paul Caruana-Galizia & Xavier Greenwood

Technology changes our lives in ways that follow a familiar pattern: a shift takes place with impacts which, at first, are invisible or unreported. Only slowly does it become clear that the effects are multiples bigger than we first realised.

Something like this is happening with the sale of illegal drugs on the darknet. It is not the biggest marketplace; sales here still account for a small share of the overall market. But the darknet offers lower prices and higher purity than street corner sales – and it has managed to create an environment of trust in which buyers rate sellers in the same way that customers rate restaurants on TripAdvisor.

The darknet drug trade is growing. Its presence is rippling through the supply chain, and further undermining the police’s efforts to fight the drugs trade.

Paul Caruana Galizia and Xavier Greenwood report

It was at the Glen Park Library in San Francisco on October 1, 2013 that the FBI finally got Ross Ulbricht. He was 29 years old and worth $28.5m. Ulbricht amassed his wealth as the mastermind behind Silk Road, a darknet marketplace where anything – from drugs and weapons to hitmen and malware – could be traded freely and anonymously.

Ulbricht’s arrest came a day earlier than planned. One FBI agent went under cover and asked Ulbricht to log into Silk Road to fix a technical problem. Two other FBI agents, one male and one female, both in plain clothes, entered the library and staged a lovers’ row next to Ulbricht, in the science fiction section. Ulbricht looked up and the male agent snatched his laptop, which was open and running the site, and passed it to the other agent. Catching Ulbricht in person – using his laptop to log into the back-end of the site with his own account – was the only way to prove that he was the man responsible for Silk Road.

In 2015, Ulbricht was convicted of money laundering, computer hacking, conspiracy to traffic fraudulent identity documents, and conspiracy to traffic narcotics over the internet. He is serving a double life sentence, plus 40 years, with no possibility of parole.

Ulbricht’s rise and fall teaches us three lessons about the darknet. First, it is difficult to catch the people behind darknet marketplaces. Ulbricht was found almost by accident; he carelessly left a digital trail to an old alias linked to one of his email accounts. Even after he was uncovered, catching him was a whole other game. His arrest came a day earlier than planned because that is when agents saw an opportunity to distract him while he was at work.

Second, Ulbricht ran Silk Road successfully for almost three years. He made a lot of money. He should have quit while he was ahead. The longer a darknet marketplace exists the greater the chances of its operators slipping up, or that law enforcement takes an interest.

Third, it is for this reason that our research has uncovered two striking facts: most darknet marketplaces have lifespans of just six months; and more close as a result of exit scams – in which operators shut down without notice, taking the balance of all their users’ money – than as a result of law enforcement raids.

The size of these exit scams can run into the hundreds of millions of pounds. But there is little evidence at the moment that they are deterring buyers.

Some platforms are working to allay concerns about exit scams by moving towards decentralisation, holding “keys” to accounts in which money is held rather than holding the money in escrow. Two parties – some combination of the buyer, seller and platform – must use their keys to complete the transaction, meaning no one party has the ability to cut and run. In any case, platform users are taking a calculated risk; a roughly one-in-180 chance (one day every six months) of being caught up in an exit scam when they are using the platform.

Adam Winstock, a professor at University College London and founder of the Global Drug Survey, has been tracking the rise of darknet drug markets since 2012, and believes as much as 10 per cent of the global drug market is contained by the darknet. “It reflects an increase in e-commerce which we’ve seen everywhere else,” Winstock says. “The war on drugs is already pretty lost. But the darknet market says the playing field is so different now, you haven’t got a chance in hell.”

What is the darknet?

The darknet is a part of the internet that’s hidden to popular search engines like Google. But it only takes a minute of Googling to find out how to access it. The first step is downloading Tor, an anonymous browser whose name is an abbreviation of The Onion Router. It works by directing internet traffic through a global network of relays, splitting each user’s online behaviour into several thousand layers and so concealing their identity.

There are countless marketplaces selling drugs on the dark web, and the biggest of them is Dream Market. We found more than 85,000 adverts for drugs on any given day, compared to Silk Road’s 13,000 adverts when it was closed.

The more surprising aspect of darknet marketplaces like Dream Market is how mundane they look. Logging into a darknet marketplace is like logging into eBay or Amazon. It has a familiar interface, the same search functionality, and the same put-in-basket and check-out shopping procedure.

Paradoxically, one of the effects of the darknet is to make the buying of drugs seem more open, and to raise levels of trust between buyers and sellers. Once in, you can browse freely, safe in the knowledge that you’re unlikely ever to get caught. You can search through different types of heroin, filtering for purity, price and origin. On Dream Market, there are drug categories for barbiturates (depressants prescribed for anxiety), benzos (tranquilisers like Valium or Xanax), cannabis (hash, bud or oil), dissociatives (like ketamine), ecstasy (designer tablets or MDMA powder), opioids (including heroin, tramadol and OxyContin), psychedelics (like LSD and magic mushrooms) and steroids. You can also find the paraphernalia to make (base chemical components) and take drugs (pipes, syringes).

“There is an active user-forum in which buyers and sellers interact, and buyers swap advice and assurances on products and sellers”

Given that the technology is all about anonymising identities and transactions, it may seem surprising buyers know which sellers to trust, and sellers which buyers to avoid – but they do.

Like Amazon and eBay, sellers receive star ratings – one star to five – and comments on their performance. An escrow system, a trusted third party that holds funds until a transaction is fulfilled, safeguards transactions, which are invariably made using cryptocurrencies. There is an active user-forum in which buyers and sellers interact, and buyers swap advice and assurances on products and sellers. On Dream Market’s forum, the Product and Vendor Reviews subforum spans 3,908 topics and 51,151 posts. One topic is titled “Looking for a reliable LSD vendor”, a discussion of LSD quality, sample quantities, and the reliability of different sellers. The Scams subforum spans 1,606 topics and 7,923 posts, and is mainly populated by buyers warning each other about untrustworthy sellers and dirty product.

Sellers have profile pages where they receive mostly stellar ratings from their customers. On Dream Market, a seller called DutchPirateShop, popular among heroin buyers, received 7,753 ratings at the time of writing of which 91 per cent were five-star. RayfulWhyte, popular among cocaine buyers, received 5,094 ratings of which 98 per cent were five-star. Neither DutchPirateShop or RayfulWhyte are exceptional; both are close to the marketplace average. The darknet is a market ruthlessly policed by ratings. With a restaurant on TripAdvisor, a potential customer may see an average rating and go anyway; the worst that can happen is an average meal. Both the restaurant and the customer will survive the experience.

But with a drug seller, few people are willing to take risks. An average rating can mean a product that is not only low quality, but unsafe. It can mean a delivery system that could get the buyer caught. The sample of major sellers we are left with are four to five-star operators. And they are proud of their ratings.

“We are here to supply you with the best quality products as well as customer service. Our aim is to create an honest, reliable & trustworthy business fit only to serve you the customer”

RayfulWhyte advertises a “New freebase batch [of cocaine] in from our HQ in Peru”. They go on: “We are here to supply you with the best quality products as well as customer service. Our aim is to create an honest, reliable & trustworthy business fit only to serve you the customer.” Concerned about delivery? “We know how important it is to get products to you as quick as possible this is why we pride ourselves on efficiency hence why we have one of the highest track records for Next Day Delivery.”

One gram of MDMA can be ordered for next day with no delivery charge. It is usually sent under a false name, allowing an alibi, in an ordinary envelope. It would be wrapped in a mylar bag – polyester resin laminated to aluminium foil – which seems to be the gold standard for drug postage as much as for food storage.

When we asked the UK’s National Crime Agency why it is so hard to intercept deliveries of illicit drugs bought off the darknet, a spokesperson said that they “work closely with Border Force and postal service colleagues to intercept these packages with demonstrable success”.

It does not look like it. Our analysis of a single day of drug adverts on Dream Market values the total vendor market for MDMA, heroin, cocaine and cannabis – the four main categories – at £191m over 37,298 adverts. The true size of the market is much larger given that sellers sell multiples of each item they advertise. Of these four drugs, cannabis is by far the biggest vendor market, valued at £124m over 23,606 adverts.

Teodora Groshkova, a scientific analyst at the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA), estimates that Dream Market’s sales currently amount to £535,000 (€600,000) a day, twice Silk Road’s peak. Dream Market charges sellers a 4 per cent commission on sales, just above the average of 3.8 per cent across all platforms, giving it a daily revenue of more than £20,000.

Sellers primarily service small to medium-sized buyers. Our sample of adverts across each drug shows that between 97 and 99 per cent of all listings fall into the bottom 10 per cent of their price range. Groshkova supports this picture: “In terms of the types of quantity traded online, usually they’re retail. Cannabis is typically one or five grams, and cocaine is one gram.”

But she adds that dealers might be getting in on the act. “Increasingly with MDMA and cannabis,” she says, “we’re seeing a kilo or 500g [being sold]. This suggests that these markets are being used by people who have the intention to resell those quantities and they are selling these on to other users.”



The dealer trend is helped by the fact that drugs on the darknet are both cheaper and more potent than what is available on the street. This is because they cut out middlemen: buyers can go directly to supplier or at least to individuals much closer to the drug’s origin. A gram of cocaine with 88 per cent purity on Dream Market costs around £60. On Europe’s streets, according to EMCDDA data, the price per gram is broadly similar but purity hovers around 53 per cent. In general, the unit price of drugs – potency per pound – is dropping sharply across Europe. The street price of a gram of MDMA in Europe, for example, has dropped by 18 per cent while its purity has gone up by 125 per cent. But the darknet’s share of the global drug market is still too small – 10 per cent at Winstock’s estimate – to explain this trend. It is new synthesisation methods and the professionalisation of the drug trade that explain a large share of the lower unit prices, and darknet markets are just part of that trend.

“Drugs on the darknet are both cheaper and more potent than what is available on the street”

Little about the darknet drugs market can be said with certainty, except perhaps that it is resilient; knocking out a major marketplace like Silk Road prompts a rush of new ventures. And the tendency is for operators to close down voluntarily after six months, taking huge sums of their customers’ cash with them; except sometimes they don’t.

Dream Market has had remarkable longevity. Despite the arrest of administrator and online drug kingpin Gal Vallerius, aka OxyMonster, in August 2017, and despite some fears among users that the whole site is now in control of law enforcement (a tactic that has been used before to collect information), it celebrated its fifth birthday in November 2018.

Here and now, the best estimate is that the darknet amounts to a relatively small tail of the whole drug market. But already it is wagging the dog. Lower prices and higher purity are feeding through into the wider marketplace, and the driver of it all is trust.