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Colin Moore Colin Moore

Does Dark Web Drug Dealing Make the World a Better Place?


Cybermarkets are seen to promote individual liberty, violence-free transactions and less-contaminated drugs. Is their main failing simply their inability to scale up massively? Substance.com investigates.

20 Substance
Score


Ross Ulbricht Photo via

Ross Ulbricht Photo via

“Silk Road is transforming a notoriously violent industry into a safe online marketplace, removing the risk of face-to-face transactions. We [are] humanity’s first truly free, anonymous, unbiased marketplace.”

These were the first words of the welcome on the homepage of Silk Road, the first-ever illegal Dark Web drug market, when the site went live in February 2011. They were written by the site’s founder Dread Pirate Roberts—real name: Ross William Ulbricht—who was then a 27-year-old self-described libertarian in thrall to the idea of real freedom: “Freedom from violence, from arbitrary morals and law, from corrupt centralized authorities and from centralization altogether.”

The illegal Dark Web, which is only accessible by volunteer-operated encrypted networks like Tor, attracts many “freedom-loving” types—libertarians, hackers, anarchists—as well as criminals of all kinds. It is home to a vast underground of black markets that move contraband. Trafficking has always been a high-reward, high-risk business. The creation of a massive anonymous online drug trafficking operation enabled Ulbricht to make more than $80 million in less than three years—even as he called himself a revolutionary promoting freedom, and safer drug selling, buying and using, and an end to prohibition and the violence of the drug war.

In October 2013, the FBI arrested Ulbricht and shut down Silk Road. He is now in jail awaiting trial on charges including narcotics trafficking, money laundering, computer hacking—and conspiracy to commit murder. This advocate of nonviolence allegedly paid hit men to kill a blackmailer and one of his employees. (One of the guns for hire was an undercover cop.)

His personal legal problems, however, do not invalidate his claims about Silk Road’s higher mission. It is still possible to ask, with a straight face, whether drug “cryptomarkets” are—or are capable of—transforming the illegal drug trade from a violent struggle between ruthless organized crime groups to a network of individual entrepreneurs and consumers. Or, more modestly, do these markets—or can they—promote safer drug dealing and using? Substance.com surveyed vendors and customers on Silk Road 2.0 and other cybermarkets and evaluated new research to answer these questions.

The FBI’s success in shutting down Silk Road did not spell doom for the illegal online drug bazaar. By November 2013, Silk Road administrators had a better-protected 2.0 version up and running. Meantime, rival marketplaces, such as Agora and Evolution, continue to operate, with Agora quickly becoming the new standard for online drug transactions. Its main competitor, Black Market Reloaded, shut down in November 2013 after its source code was leaked. After that, Sheep was the main competitor until it too went under—and stole a treasure in users’ bitcoin, the peer-to-peer crypto currency. A big part of Black Market Reloaded’s success came from its willingness to sell lethal weapons—even dynamite and other explosives. By contrast, Silk Road offers a wide range of merchandise but draws the line at weapons; the staff, who work on commission, take measures to reduce user risks, such as product contamination.

Some Silk Road 2.0 vendors voice on their profiles a belief in the freedom to use illegal drugs recreationally and a commitment to a safe forum for people to exercise that freedom. A vendor with over 1,000 successful sales, JustSmuggledN, writes: “This job is done because of the belief in freedom of choice, as we are free spirits who deserve that right. Our policy is to live by these principles and we make it our mission to satisfy all of our clients! We believe in good business practices and we run our operation that way.”

“Whereas violence was commonly used to gain market share, protect turfs and resolve conflicts,” the authors write, “the virtual location and anonymity that the cryptomarket provides reduces or eliminates the need—or even the ability—to resort to violence.”

The site’s forums engender discussion of the concepts of freedom, philosophy, economics, justice and drug safety. For example, in a November 2013 post, AussieMitch writes, “I believe that the consumption of mind-altering substances by consenting adults is a fundamental human right that is being impinged on by current government policy in much of the world. I believe that protecting the rightful freedoms of my fellow humans by subverting the current laws and assisting others in doing so is not only ethically justifiable but also morally commendable.” He includes his own 10-point ethical code for participation in the drug marketplace.

The Dark Web Model and the Drug War

A new study suggests that these underground drug marketplaces may—if scaled up enormously, in some distant future—pose an actual challenge to the cartel business model. Called “Not an ‘eBay for Drugs’: The Cryptomarket “Silk Road” as a Paradigm-Shifting Criminal Innovation” and authored by University of Manchester criminal science expert Judith Aldridge and University of Lausanne legal expert David Decary-Hetu, the study uses a tailor-made web crawler to scrape feedback and review data from Silk Road’s vendor profiles. Some surprising findings result. The most significant is that the amount of Silk Road’s bulk sales is much greater than analysts had previously estimated. It turns out that many customers are small-scale “street” dealers obtaining inventory on the Dark Web rather than traditional organized crime channels.

Estimated sales on Silk Road jumped from $14.4 million in mid-2012 to $89.7 million in the month before its shutdown, an increase of more than 600%. On average, 40% of these sales consisted of bulk buys; the top 20% included, for example, purchases of cannabis ranging from $1,000 to $1,475 and of ecstasy for $3,494. Many vendors offer their product at lower “dealer” prices when bought in bulk; some customers buy in bulk several times a month. In addition, “precursor” ingredients for hallucinogens, say, or methamphetamine are available for would-be producers and sellers.

“This new breed of drug dealer is…likely to be relatively free from the violence typically associated with traditional drug markets,” the authors write. “Whereas violence [in the traditional drug trade] was commonly used to gain market share, protect turfs and resolve conflicts, the virtual location and anonymity that the cryptomarket provides reduces or eliminates the need—or even the ability—to resort to violence.”

The claim that these drug cryptomarkets are comparatively free of violence is sound enough. But the authors go further, arguing that because this alternative drug supply chain has access to a worldwide market of new customers and the ability to operate in a low-risk environment through anonymous exchanges, it could—if scaled up—transform the global drug trade. That assertion may look good on paper, but in reality, the total revenue of the Dark Web drug market is minuscule compared to the $500 billion annual market of the cartels. While Silk Road’s 600% annual increase in sales indicates the alternative model’s growth potential, scaling up to a size capable of posing a competitive threat to the cartel business is impossible to credit.

“My hunch is that Silk Road may already be hitting some scalability limits due to the Tor network itself,” Carnegie Mellon computer security professor Nicolas Christin told The Daily Dot. “Although it has grown by leaps and bounds, it is still not a very large network, and most relays are run by volunteers. Hidden services are still a very experimental feature with known issues.”

The Safety of Deals and Drugs on the Dark Web

Putting the Zetas out of business may be off the table for Silk Road, but Silk Road gets high marks when it comes to improving the safety of drug transactions. Safety may be the main attraction of these sites for buyers and sellers. When Substance.com asked 20 participants on the forums, not a single one of them believed that transactions in Dark Web marketplaces present a danger from either law enforcement or violent or competing drug dealers.

“I started selling my products online when dealing on the streets became too dangerous for me and my family,” Australian cannabis and pharmaceuticals vendor TheSlyFox says. “Years ago, when I was 18, I sold small $50 bags of cannabis to a customer who bought from me successfully three times before. But the fourth time, I was seriously assaulted and robbed by seven Samoan New Zealanders. They stole all of my drugs, my money and left me to die.” Since he began selling his goods online, he has not encountered even the threat of violence.

The danger in buying drugs from street dealers sends many consumers to Silk Road. A Pennsylvania man described how an armed drug dealer ordered him to show his track marks to prove that he was not an undercover cop. “If I’m going down,” the dealer said, “I’m going to take you with me.” The man didn’t have track marks, but his accompanying friend did, sparing both of their lives. After two other life-threatening street deals, he started purchasing drugs from a trusted broker who buys online on behalf of others for a small fee.

Silk Road beats the street in the safety not only in the buying but also the selling of the drugs themselves. “Reducing face-face interaction was really important to me since a dealer mistrusting me is always an awful feeling and the situation might escalate,” says PGX83, an Agora user. “However, I didn’t primarily switch from traditional street deals to online marketplaces because of safety. It’s just more comfortable, you have a nice review system and can order directly from manufacturers guaranteeing better quality and also better prices.”

The purity of a street drug is typically unknown to the consumer; the further down the supply chain the product moves, the more cutting it goes through. With street heroin differing ratios of pure heroin to fentanyl or other substances can result in a fatal overdose. Silk Road features numerous listings that advertise high purity and sometimes include pictures of the product alongside chemical or EZ-test results. EZ tests, the most popular quick chemical testing kit, are also sold on the site. Small-scale drug dealers who source from Silk Road are likely get cleaner drugs (and lower prices), and may in turn sell a purer, safer product.

Cybermarkets are a go-to for recreational drug users rather than the seriously addicted. For one thing, it requires sophisticated Tor-friendly skills. And as with eBay or Amazon, Silk Road offers delayed rather than immediate gratification, as shipping and delivery can take a week or more. Most addicts operate on a more immediate schedule. “Drugs typically associated with drug dependence, harmful use and chaotic lifestyles (heroin, methamphetamine and crack cocaine) do not much appear on Silk Road, and generate very little revenue,” the authors write. The fact that a majority of Silk Road revenue comes from nonaddictive drugs like marijuana and hallucinogens supports this “recreational user” profile. It may also support the claim the claim of safer drug use. And for libertarians, it may signal that users are “productive members of society” who pay their bills at the same time that they party on the weekends with pot or take the occasional LSD vacation—as opposed to users whose addictions often have negative consequences for others and who may need government services and other support.

Connections to Organized Crime

One thing that could threaten the sense of security enjoyed by Silk Road members is the incursion by organized crime. The Mexican cartels are the US’s main source of wholesale narcotics. Once they get their supply across the border, they outsource the retailing to street gangs and motorcycle clubs. They have the sophistication to manipulate the most complexly encrypted network, but they have little reason to. A single cartel shipment may weigh in at several hundred kilos, and due to postal constraints, customs and the difficulties in doing business in large numbers of bitcoin, selling through online sites like Silk Road is not feasible. Our own search of user and vendor profiles, forum discussions and interviews with users and vendors found no evidence of an organized crime presence.

The most common vendor scam is to require consumers to release their funds from escrow before shipping and then making off with the bitcoin; the most common customer scam is to claim nonreceipt of purchase, request a refund from the vendor and/or open a dispute with marketplace staff in an attempt to get a refund.

Yet the cybermarkets are connected to the cartels, who are the original source of most heroin and cocaine. Many vendors advertise heroin or cocaine as “cartel,” “straight from the cartel, “straight from the mountains of Colombia,” “straight from the Key”—tags indicating a pure product and implying sourcing from the traditional cartel supply chain. One vendor who seemed likely to have direct cartel involvement was Chiquita, a South American vendor of MDMA and cocaine starting at 50 grams and going all the way to 100 kg. (Chiquita has not re-emerged since the original Silk Road was seized.) This “stamp of approval” is distinctly absent from pitches for other substances, however. Marijuana vendor PureFireMeds describes himself as an LA-based grow operation, for example, and LSD vendor HouseOfSpirit says that he sources his product from connections with the Rainbow Family of Living Light. Even with cartel products being represented on the Dark Web, the elimination of in-person interaction and the Tor network’s anonymity protect users from the violence that the cartels thrive on.

The majority of Silk Road drug revenue in 2013 came from drugs that the major cartels do not typically traffic, including ecstasy ($19.9 million) and psychedelics ($8.6 million), according to the new study. If you add cannabis ($24.8 million), which is sourced from either entrepreneurs or cartels, the total is $53.3 million. By contrast, heroin, cocaine, methamphetamine (and prescription drugs) added up to $32.2 million.

Our survey found that in July 2014 marijuana and ecstasy were the top-purchased bulk products, with domestic listings of up to five pounds for pot and one kg for X. Hallucinogens and opiates have far fewer bulk listings at wholesale prices. Several listings promise “great bag appeal” on bulk marijuana, and pitch bulk cocaine as “Entrepreneur’s Special.” Feedback on these bulk listings often includes commentary on how well the product resells.

We found only three listings for methamphetamine and eight for crack cocaine. These drugs, along with heroin and, to some extent, cannabis, are the mainstays of the global drug cartel business, although a few organized crime groups specialize in hallucinogens, such Israel’s Abergil family, which moves ecstasy.

Anonymity and Accountability

Anonymity removes accountability, however, and scams run rampant across cyber black markets. The most common vendor scam is to require consumers to release their funds from escrow before shipping and then make off with the bitcoin; the most common customer scam is to claim nonreceipt of purchase, request a refund from the vendor and/or open a dispute with marketplace staff in an attempt to get a refund from the marketplace. The only available recourse is a commentary on the vendors-only forum that offers feedback on consumers, and swift banning by marketplace staff of reported scam vendors. When asked to comment, JustSmuggledN offered this advice: “Trust no one.” TheSlyFox bemoaned the absence of a “bounty” or “hits” section on the vendors-only forum.

After a theft of $2.7 million in Bitcoin from Silk Road 2.0′s server in February, the forum exploded with cries of revenge. In its public announcement of the theft, Defcon, the administrator of Silk Road 2.0, released the user names and other information of the three suspected perpetrators and wrote, “If anyone has purchased or sold to these usernames, expect generous bounties for any information you can contribute which leads to identification.” Several vendors report having lost tens of thousands of dollars in Bitcoin to the theft. Not long after, the Silk Road staff announced that their commissions would go toward repaying every member who was affected.

On May 27, Defcom released a public statement announcing that more than 80% of the losses had been repaid. It read, in part: “It is unprecedented for any entity, Darknet or clearnet, to completely repay the victims of a Bitcoin hack. We are sending a clear message of integrity and justice, louder than the slander our oppressors can push into the news. History will prove that we are not criminals, we are revolutionaries. We are slaving to transform a notoriously-violent industry into a safe online marketplace, removing the risk of face-to-face transactions.”

If he was not already sitting in a jail cell in Brooklyn, you could almost believe that Ross Ulbricht had written and sent the message from his own computer.

Colin Moore is a Pennsylvania-based writer who has been following the trends in the Dark Web’s illegal marketplaces for several years. Previously he wrote press releases and content for a media group in Texas, started a small alternative newsletter about local events, and wrote a monthly column for a local music e-zine, Get M.A.D.E.