In past years, we have seen a continuous increase in crypto transactions and scams on the dark Web. The crypto-money laundering market is currently more robust than ever before.
The dark Web has become the most challenging & undetectable medium adopted by cyber criminals to meet their illicit activities. Cyber crimes happening inside the hidden world are real-world crimes. As in 2013, when the US FBI took down the most well-known marketplace Silk Road, these criminal activities caught the public attention.
Researchers have developed different strategies and ways to monitor and detect crimes within the deep Web. By examining dark web crime via chain Analysis, you can better understand how this works and find new policies for combating it.
Dark Web And Cryptocurrency
The cryptocurrency economy has been boosted by black market sales, ransomware, theft, and money laundering. Despite the strange fact that every transaction in that economy is recorded on an immutable ledger known as Blockchain, recent data determine that advancements in tracking blockchain activity and the struggle to combat illegal activities may be having an effect.
If it’s not decreasing the overall volume of Crime, then at least cutting down on the number of laundering outlets leaving the crypto black market with few options to cash out its proceeds than it had in the past 10 years.
However, data stealing on the darknet is a major concern as hackers have started using simple tricks to hack social networks & violate privacy. However, in 2020 darknet set a new profit record for a total of $1.7 billion worth of cryptocurrency, according to chainalysis report.
What is Chain Analysis & How it Works
Chain analysis is a hack that utilizes blockchain technology and becomes a strong tool to uncover and combat dark web crime. Every step you make on a public blockchain, such as trading cryptocurrency, is logged on the Blockchain for all the world to see.
It is a method of examining and tracking transactions that occur on Blockchain. It involves the process of analyzing the public ledger of a cryptocurrency like Bitcoin to get insights into the flow of funds and identity patterns and links between different addresses & transactions.
However, Chain analysis depends on the transparency of blockchain technology, where all transactions are recorded & publicly available. By examining blockchain data, professionals can trace the movement of cryptocurrencies, identifying the origin and destination of funds and entities involved in these transactions.
This analysis is usually employed by regulatory authorities, law enforcement agencies, and cybersecurity companies to scrutinize unlawful activities such as terrorist financing, fraud, money laundering, and other illegal transactions that may occur via cryptocurrencies.
Chain analysis uses techniques and tools such as machine learning algorithms, mining, and clustering to reveal patterns and links between different addresses and transactions. Following the digital traces rooted in the Blockchain lets experts extract valuable facts about the actions and behavior of crypto users.
It is important to note that while chain analysis can offer valuable details, it doesn’t necessarily disclose the real-world identities of crypto users. However, the nature of cryptocurrencies can make it quite difficult to directly link blockchain addresses to particular individuals without additional investigative ways or cooperation from exchanges or other service providers.
Darknet Crypto Crime Report via Chain Analysis
In 2023, illicit cryptocurrency volumes will reach high at all times. Every year, chain analysis introduces a report about illegal crypto activity on the darknet to evaluate the power of blockchain transparency.
However, these kinds of reports are impractical in traditional finance, and to teach investigators and professionals about the latest report about crypto-related Crime, they must know about them. We will also discuss last year’s trend; the previous year witnessed significant upheaval in the cryptocurrency industry, marked by the collapse of numerous prominent companies such as Celsius, Three Arrows Capital, FTX, and more. Some of these firms faced allegations of fraudulent activities before their demise.
However, the earlier allegations make this year’s crypto crime report challenging, as some feel those businesses should be treated as criminal enterprises. However, this year’s trends have made clear that blockchains are intrinsically transparent.
Here we will let you focus on illegal activities that can be measured on-chain; here is data from 2022 affected crypto-related Crime.
However, various markets were seized in these years, but the illegal transaction volume increased for the consecutive year, hitting an all-time high record of $20.1 billion. Though, it may surely grow over time as Chainalysis are founding new addresses linked with illegal activities.
Although, it is important to consider that this value doesn’t include earnings from crimes unrelated to cryptocurrency itself, such as cases involving usual drug trafficking that utilize cryptocurrency for transactions.
For Example, Chain Analysis’s previous report specifies $14 billion in illicit activity for 2021, but we have now revised that figure to $18 billion, primarily due to identifying new cryptocurrency scams.
As per the reports, 44% of 2022’s illegal transaction volume came from activity linked with sanctioned entities.
In all categories of cryptocurrency-related Crime, transaction volumes experienced a decline, except for stolen funds, which witnessed a 7% increase compared to the previous year. The downward trend can be qualified to the market downturn, which may have affected the revenue generated by crypto scams.
During bear markets, users tend to be more skeptical and less inclined to believe promises of high returns, resulting in lower scam revenues. Generally, when there is less money invested in cryptocurrencies overall, there is also a connection with reduced funds associated with crypto-related crimes.
However, the share of all crypto activity linked with illegal activity has increased for the first time since 2019, from 0.12% in 2021 to 0.24% in 2022.
It’s not come as a surprise, as we can expect, total transaction volume reduces with the onset of the bear market; as chain analysis mentioned, illegal transaction volume rose slightly. You can check the complete Chain Analysis Crypto crime report 2023.
How Dark Web Crypto Crimes Are Investigated
As we all know, the dark web nature is quite anonymous; investigating crypto crimes on the dark Web involves specialized hacks, collaboration with law enforcement agencies, and the use of advanced technology.
Although, cryptocurrencies such as bitcoin are usually used in dark web transactions because of their anonymity. Investigators use blockchain analysis tools like chainalysis to monitor the transactions on Blockchain. By examining the transaction patterns, they can spot suspicious activities and link transactions to a particular person or criminal organization.
In some cases, law enforcement set up operations to uncover illegal activities to arrest criminals involved in darknet crypto crimes. Sometimes they act like a buyer or seller on illegal markets, assembling evidence and identifying key players in criminal networks.
Moreover, investigators aim to identify and break away from criminal networks rather than focusing on a single person. By connecting connections and scrutinizing the flow of funds via blockchain analysis, law enforcement can uncover these criminal networks.
However, it’s worth noting that investigating darknet crypto crimes can be difficult because of the advanced anonymous tools such as Tor. But, advancing blockchain analysis and law enforcement collaboration are constantly improving to combat these crimes.
Challenges in Investigating Darknet Crypto Crime
Combating with dark web crypto crimes comes with major challenges to agencies and professionals such as:
- Anonymity & Encryption- Deep web encryption makes it challenging to track crypto transactions & identifying criminals. Crypto offers high-level anonymity that the traditional financial system doesn’t offer, letting criminals cover their identities and avoid detection. Though, tracing these transactions need advanced techniques.
- Complex Networks- cryptocurrencies depend on blockchain technology, which consists of a decentralized ledger. While Blockchain offers transparency, scrutinizing and understanding complex transactions within these networks can be challenging. So it’s necessary for investigators to know specialized tools to get blockchain insight and trace illegal activities.
- Advance Crypto Technologies- new advancements in cryptocurrencies are constantly evolving. Dark web criminals familiarize themselves with these changes, utilizing privacy-focused cryptocurrencies and decentralized exchanges that further vague transaction trails.
- Money Laundering Techniques- darknet criminals use money laundering techniques to disguise the origins and destinations of illegal funds. They may use mixers, tumblers, and other services to launder crypto, making them challenging to trace.
- Security Measure- criminals on the darknet use advanced Encryption to secure their transactions and activities. Breaking these Encryptions needs specialized hacks and techniques.
How Chainalysis Helps Catch Cryptocurrency Criminals
The blockchain analysis firm helps to monitor and take down drug dealers, money launderers, and terrorists. It also helped law enforcement across the world to catch crypto criminals.
Chain analysis plays a significant role in arresting crypto criminals via advanced techniques and software.
In 2014, the world’s largest cryptocurrency exchange operator revealed that hackers drained almost 650,000 Bitcoin (worth about $500 million). And from that time CEO of chain analysis gave an idea since blockchain ledgers are public. What if someone makes a tool that filters all the data and traces the stolen Bitcoin?
Then chain Analysis comes into being, which managed to trace the stolen Bitcoins. In 2015, chain analysis helped catch two rogue FBI agents who stole money while investigating the Silk Road market. After that, chain analysis hunted down the money launderers who stole the cryptocurrency.
As per reports, cases can actually be solved, as the chain analysis offers amazing techniques and solutions that let investigators examine blockchain transactions, identify suspicious patterns, and reveal the identities of individuals involved in criminal activities. Here are some techniques in which chain analysis helps in catching criminals:
- Blockchain Analysis: chainalysis authority lies in blockchain analysis to reveal the flow of funds, monitor transactions, and determine the address involved in criminal activities. This analysis assists law enforcement agencies and cybersecurity organizations in building comprehensive details of illegal operations.
- Transaction monitoring- chainanalysis offers complicated transaction monitoring solutions that track and examine cryptocurrency transactions in real time. Analyzing suspicious moves and connections between addresses helps identify potentially illegal transactions and activities.
- Risk Scoring- chainanalysis allot risk scores to addresses and transactions based on different factors, including illegal activities linked with known criminal addresses or engagement in suspicious actions.
- Reporting- Chain analysis makes detailed reports and shares the data with law enforcement agencies. These reports give insights into emerging dark market trends, risk assessment, and solutions to combat crypto crimes.
Largest Darknet Markets Are Taken Down by Law Enforcement
Law enforcement agencies have successfully seized some of the darknet’s trafficked sites. However, these agencies actively participate with other bodies to target the criminals involved in these illicit activities. With the combined efforts of law enforcement along with chainanalysis techniques, operations, and data analysis, they are able to seize the biggest sites. Some of the largest markets are mentioned below:
Hydra Darknet Market
Hydera was one of the largest darknet marketplaces seized by German law enforcement. The market has some 19,000 registered seller accounts and more than 17 Million customers across the globe. In a press report, the Central Office for Combating Cybercrime and Germany’s criminal police office stated that the market had been taken down and $24.6 million worth of Bitcoin seized.
However, the Hydra market, allegedly run by Russians, was used to launder money and sell drugs. It was also used to deal with stolen documents, databases, cybercrime tools, and services like viruses for hire.
One of the major markets of the dark Web, the Silk Road, was shut down in 2013. it was mostly used to trade drugs, fake driving licenses, malware, and ransomware. The FBI shut down the market & arrested founder Ross Ulbricht; he was convicted of seven charges and sentenced to life in prison without the possibility of people.
However, in November 2020, the US Government seized more than $1 billion worth of Bitcoin allegedly connected to the Silk Road.
Wall Street Market
It’s one of the biggest dark web takedowns to date, in which 500kg of drugs were seized and $6.5 million in cash and cryptocurrency taken away.
This marketplace, founded in 2013 and only accessed with anonymity software, has been the busiest drug site, specializing in selling stolen data and narcotics. Suddenly, the admin announced that the site was going to be down. However, the notice coincides with the FBI announcement and Europol that they have arrested 61 people and taken down 50 dark web accounts as part of an international police operation. International authorities have arrested lots of dark Webs accused vendors.
Alphabay Darknet Market
It is one of the biggest marketplaces where hundreds of criminals anonymously trade drugs, weapons, hacking tools, stolen identities, and a host of other illicit activities has been shut down by law enforcement.
Initially, alphabay websites were seized across the globe, and the site’s creator was arrested. The site functioned for almost two years and had transactions exceeding $1 billion in Bitcoin and other digital currencies.
Empire market was well-known for drug dealing, fake documents, and malware. After seizing the silk road, and alphabay shut down. Empire became the most trafficked dark web marketplace.
The empire market died down trading in August following a suspected exit scam. Its effectual removal from the scene follows the law enforcement takedown of its forerunner, including alpha bay, silk road, and Hansa.
When the market closed for four consecutive days, initial reports of a DDoS attack said thousands of BTC held in escrow were gone.
However, the takedown of these biggest darknet markets is a reminder that law enforcement agencies are still struggling to combat illegal activities on the dark Web. so it’s essential for users to know the legal and security risks linked with engaging in activities on darknet markets. It is recommended to stay away from illegal activities on the darknet.
Darknet Market Trends via Chain Analysis Report
Like traditional online markers, darknet markets also offer a platform for sellers to connect with buyers to facilitate trading illegal services, mostly drugs, stolen data, and credit cards. Chainalysis reports in 2021 on geographic trends in darknet markets.
However, the report says 2020 was the first dark web market revenue year to top $1.5 billion. It also says that the leading cause behind the increased growth in revenue is a particular darknet market, Hydra.
Hydra was the leading darknet market, accounting for over 75% of the total dark web revenue in 2020. And Eastern Europe has the highest volume rates of cryptocurrency transactions linked with criminal activity. In 2019, Hydra announced plans to increase $146 Million in an ICO for new global DNM services, but the plan didn’t execute because of Covid.
This creates a crucial challenge for US and European law enforcement, as Hydra has developed operations such as an Uber-like system for assigning drug deliveries to anonymous couriers, who deliver the parcels in hidden public locations.
We have seen that fraud shops exceed the drug market in revenue amongst global dark web markets, and more like drug markets, fraud shops on the darknet gather the majority of their revenues in Bitcoin.
Geography Trends of Dark Web Markets
The largest darknet markets consumers were from Northern & western Europe, North America, and Eastern Europe.
Eastern Europe trades the most value of dark web sellers because of the Hydra market. The United States, China, Ukraine, and Russia dominate regarding both values sent and received Bitcoin from the darknet. Also, the reports suspect that a good deal of Russia’s and China’s volume received by Darknet markets represents funds flowing to money laundering services concentrated in those states. Although, it’s also possible that similar drug and counterfeit items services are also operating in other countries, getting large volumes of funds from darknet markets. Here are the countries mentioned as per their crypto transaction volume:
- Russia remains on top in transactions large volume of crypto, $288 million.
- The United States ranks 2nd in sending or receiving total crypto of $179 million.
- Ukraine is the third largest in transacting $ 98 million from dark web markets.
- China remains in the 4th number in transacting $87 million.
- The United Kingdom stands 5th in trading $56 Million from darknet markets.
- Venezuela trades around $55 Million from dark web markets.
- Vietnam’s total value sent or received from darknet marketplaces is $49 Million.
- Turkey sends or receives a total value from the darknet market of $45 Million.
- India trades a total of $42 million from dark web markets.
- Germany’s total value sent or received from darknet markets is $41 Million.
This report is from 2020. However, the trends and currency flows may change over time.
Q. How to secure oneself from identity theft?
To protect from identity theft on the dark Web, it is recommended for users take necessary security measures such as using strong passwords, allowing 2FA to add an extra layer of security, being aware of phishing attacks, using secure darknet forums, using trusted VPN and don’t share your personal details.
Q. What type of criminal activity occurs on the dark Web?
Some of the major Crime that happens on the dark Web are human trafficking, pornography, drug transactions, child pornography, terrorism, assassination, and counterfeit items. However, approximately 60% of dark web websites are dedicated to illicit activities.
Chainalysis offers cryptocurrency investigation and solutions to law enforcement regulators as they work together to combat illegal crypto activity. The Chainalysis technique identifies the fund’s transactions and could allow the exchange to know that stolen funds have entered its exchange.
However, some darknet markets still operate despite law enforcement’s best efforts. But there are some worthy successes of authorities in closing the biggest darknet markets like the silk road, the alphabay, and others.
Hence, chainalysis assists law enforcement agencies in building a detailed report of the criminal networks operating within the cryptocurrency ecosystem. It plays a huge role in identifying and tracking crypto criminals.