The Fall of an Empire

On August 22, 2020, Empire Market shuttered their illicit operations. Previous notable marketplace takedowns like Wall Street Market in 2019, and AlphaBay and Hansa Market in 2017 have caused vendors and customers to pause, take stock of their cryptocurrencies, and wait for a takedown notice. Public reporting of the goods and services on these markets has attracted vendors and customers, but also resulted in increased law enforcement attention.

Reports indicate that the Empire moderators absconded with approximately $30 million in cryptocurrencies, including Bitcoin (BTC) and Monero (XMR). The shutdown marks one of many cybercrime marketplace closures within the last few years, leaving security professionals and law enforcement to ask “what’s next?” Where will users migrate, and how will they use technology to better ensure privacy or security in the instance of an exit scam, or a takedown.

Building an Empire

Over a hundred markets preceded Empire Market. Silk Road is often considered the prototypical market, in that it created the modern template for listings, anonymous payments, escrow services, and community driven forum.¹ In 2013, Silk Road was taken down by a law enforcement operation, which resulted in the marketplace administrator receiving a double life sentence, as well as the prosecution of the moderators. The takedown provided a warning to future marketplaces that their operations may not be completely anonymous. However, the publicized revenue from the market continued to attract individuals wishing to establish new venues.²

Many marketplaces attempted to capture the enthusiasm of Silk Road, while avoiding their administrators’ sentencing. AlphaBay launched in 2014, and instituted technological improvements to enforce security and build trust, like accepting privacy focused cryptocurrencies. Within a short period of time, the market established a solid user base of 400,000 unique customer accounts. In 2017, law enforcement seized AlphaBay in a coordinated operation with the Dutch police who had already taken over administration of Hansa. AlphaBay migrants were scooped up as they attempted to establish new accounts on Hansa. This operation³ demonstrated that law enforcement may capitalize on the confusion following a takedown in order to sow distrust with marketplace administrators.

Empire launched in January 2018 with the intention of establishing itself as the premiere venue of illicit products and services, including drugs and fraud related goods. The administrators created Empire as an homage to AlphaBay, originally launching as “OmegaBay.” The market used the same source code as AlphaBay and mimicked the layout in style and design. The name was changed in February 2018 in order to avoid confusion with the rival Omega Market. Empire’s creators even included a memoriam to AlphaBay’s late founder and developer with the message, “In Memory of Alexandre Cazes.”

Rival Empires 

Empire initially competed with other illicit cybercrime marketplaces, like Dream and Wall Street, that pre-dated the AlphaBay and Hansa takedowns. Vendors and customers were hesitant of new entrants for fear that they were law enforcement honey pots. While markets like Silk Road and AlphaBay competed by providing additional features that supported privacy and anonymity, Dream and Wall Street competed by having established user bases. Further, these marketplaces already weathered additional technological and social changes in the cybercrime ecosystem.

The proliferation of mobile technology and encrypted messaging applications like Telegram, created new venues for fraud. Chat channels for dedicated communications like drugs, carding, and fraud, provide security by default with the benefits of almost instantaneous communications. Chat does not provide an escrow feature, creating higher risk for illicit trade. However, vendors have the advantage of side-stepping marketplace commissions and vendor bonds through off-band communications. Chat also eliminates the prospect of coping with losses from a marketplace exit scam.

Since launching in February 2018, Dread has become a centralized messaging platform for cybercrime markets. This is owed partially to Reddit’s ban of fraud related subreddits in March 2018. However in 2019 during an onslaught of distributed denial of service (DDoS) extortion attacks targeting cybercrime marketplaces, Dread managed to maintain their uptime and share mirror links for other markets. These DDoS attacks exploited a Tor vulnerability that affected most marketplaces, and social news sites like Dread. The growth of Dread partially eliminated the need for marketplace forums by providing a community aspect which could not be afforded by Empire. Users on Dread could share information about a variety of topics, and vendors could share links to their pages on various markets. 

In March 2019, Dream announced their plans to shutdown, avoid the DDoS attacks, and re-launch under a new name. In April 2019, Wall Street attempted an exit scam, which resulted in a law enforcement takedown. Following Wall Street’s closure, Empire was poised to become the largest market, though they still coped with issues from ongoing DDoS attacks. A rumored exit scam in June 2019 created doubt with their userbase and sparked questions regarding the future of the marketplace.

Empire’s eventual closure could be attributed to changes in the fraud landscape, like the growth of chat, or the barrage of DDoS attacks. Empire’s inability to maintain consistent uptime or onion addresses made it difficult to attract new members. Their shutdown could also be considered the passing of an empire, perhaps marking a new age of marketplaces.

The Next Empire

After any marketplace closure, the cybercrime community also pauses and asks, “what’s next?” In the immediate aftermath of Empire’s closure, individuals posed questions on Dread asking about the integrity of newer markets, like White House. Other users ensured to stress the importance of operational security to prevent potential compromise. The fallout from AlphaBay and Hansa still looms over the community by casting doubt on the integrity of new markets. Previous closures indicate that technological or administrative changes to existing marketplaces come slowly, and are built upon tough lessons often learned from indictments and criminal complaints. Three years after the AlphaBay takedown, the Department of Justice continues to churn out sentencing orders for its moderators.⁴ The next largest cybercrime marketplace may not be able to compete with the size or revenue of Silk Road or AlphaBay, though they will likely try. Changes to the cybercrime ecosystem, and increased pressure from law enforcement will continue to place demands on the administrators.

At this time, we can only speculate on the structure of future marketplaces. The continued demands for illicit products indicates that there is some value in the current format. It is not likely that other communication tools, like chat, will completely replace marketplaces. However it will likely continue to supplement marketplaces for fraud venues. The lack of feedback, escrow, and moderators makes chat a risky endeavor for new entrants.

Following previous marketplace closures, users anticipated greater adoption of decentralized shops like OpenBazaar. Though it offers benefits over traditional marketplaces regarding administration, uptime, and encryption, issues regarding search functionality prevented users from wholly adopting. New vendorshop-as-a-service offerings may provide an alternative to the current marketplace structure. Users wishing to continue with a traditional market will likely go to White House, which requires customers to connect a PGP key to their account after registering.

Whatever the format for the next marketplace, there will be doubt regarding its longevity. Though users may be able to use privacy focused cryptocurrencies like Monero, multi-signature wallets, and v3 onion addresses, there will continue to be risk of law enforcement takedown, or exit scam. Despite these countervailing factors, administrators will try to establish their own empire and risk arrest in the process.

For more insight into the information above and how Flashpoint’s actionable intelligence can benefit your organization, request a 30 day trial here.

---