Darknet Marketplace Revenue Resurges in 2023 Amid Rise in Crypto-Related Scams and Sanctions
Summary:
Despite the shutdown of Hydra in 2022, darknet marketplaces earned at least $1.7 billion in 2023, according to Chainalysis's 2024 Crypto Crime Report. The report highlights an increase in smaller, niche marketplaces. A significant rise in cryptocurrency-related sanctions by the U.S. Office of Foreign Assets Control was also noted. By shifting focus from major darknet markets to individual actors and groups, sanctioned cryptocurrency inflows accounted for 61.5% of all illicit transactions in 2023. Despite a reduction in revenue from cryptocurrency scams, 2023 saw a surge in new scam types like romance scams. Chainalysis emphasizes digital hygiene and cautious online interactions to navigate crypto-related cybercrime in 2024.
Cyber attacks on the cryptocurrency sector persist, with darknet marketplaces being one of the two sectors showing revenue growth in 2023, per Chainalysis's recent study. The Chainalysis “2024 Crypto Crime Report,” published on Feb. 29, discloses that darknet markets yielded at least $1.7 billion in revenue in 2023 - a rise from 2022, when the largest darknet market, Hydra, was taken offline by authorities. The study revealed that while Hydra's void is not filled by a single marketplace, smaller ones serving particular niches began flourishing and showing "specialized roles." The study underscored Mega Darknet Market outshining others with over $500 billion in cryptocurrency inflows.
While darknet market revenues have not yet climbed back to the height witnessed during Hydra's operation, the report said, “We project that rule of law will continue investigating and dismantling darknet markets, especially since many sell fentanyl.” Chainalysis's cybercrime research leader, Eric Jardine, shared with Cointelegraph that niche darknet marketplaces vying for market dominance is not novel and have emerged following the shutdown of markets like the Silk Road and AlphaBay.
There was a surge in cryptocurrency-related sanctions by the United States Office of Foreign Assets Control (OFAC) in 2023, doubling the total figure to 18 sanctions on individuals or organizations, all of which had cryptocurrency addresses listed. Cryptocurrency inflows to sanctioned entities constituted 61.5% of all illicit transactions, accounting for $14.9 billion in transaction volume in 2023. According to the study, OFAC sanctions in 2023 shifted focus from major darknet markets such as Garantex and Hydra to groups and individuals, including the North Korean hacker group Kimsuky, crypto mixer Sinbad.io, Russian national Ekaterina Zhdanova, and the Gaza-based MSB Buy Cash.
The report did share somewhat encouraging news of a year-over-year reduction in revenue from cryptocurrency scams, with revenue dropping to $4.6 billion from the prior year figure of $5.9 billion. Yet, 2023 witnessed a surge in new scam categories, including 'pig butchering' or romance scams, more than doubling their revenue and showing an 85x growth since 2020.
Chainalysis's report estimated that romance scams drastically affected victims due to the significant average payment size and emphasized the rise in approval phishing scams in 2023. According to Jardine, romance scams are gaining traction because "they are effective — scammers are always on the lookout for opportunities.” He added, "These scams take weeks or months as scammers try to win the trust of their victims. Inexperienced users who don't recognize the signs of scams can be an easy target.”
Jardine advises users to be cautious in their online interactions to avoid scams and navigate cryptocurrency-related cybercrimes in 2024. He emphasized the importance of digital hygiene, particularly with password and seed phrase management, and recommended using services that prioritize security in the decentralized finance arena. He also highlighted the role of various public and private actors and individuals in creating a secure environment.
Published At
2/29/2024 5:00:00 PM
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