Darknet market crypto crimes on the rise in 2023, $1.7B revenue — Chainalysis


The crypto industry continues to suffer from cybercrimes, with darknet markets being one of the two categories showing an increase in revenue in 2023, according to the latest report from blockchain analysis firm Chainalysis. 

The Chainalysis “2024 Crypto Crime Report,” released on Feb. 29, reveals that darknet marketplaces received revenue of at least $1.7 billion in 2023 — a rebound from its 2022 data when authorities shut down the world’s largest darknet marketplace, Hydra.

While no single marketplace replaced Hydra, the report revealed that smaller marketplaces are thriving by serving specific niches and developing more “specialized roles.” Chainalysis highlighted Mega Darknet Market leading the pack with over $500 billion in crypto inflows.

However, the revenue generated from darknet markets has not yet returned to the peak levels seen during Hydra’s time. The report said:

“We expect law enforcement agencies to continue to investigate and dismantle darknet markets, especially given that many offer fentanyl products for sale.”

Eric Jardine, cybercrime research lead at Chainalysis, told Cointelegraph that the phenomenon of “niche darknet marketplaces” competing to gain market share is not a new thing and follows trends after the closures of darknet marketplaces like the Silk Road and AlphaBay.

In addition to darknet market revenue increases, 2023 saw crypto-linked sanctions by the United States Office of Foreign Assets Control (OFAC) more than double, with a total of 18 sanctions on individuals or entities, all of which included cryptocurrency addresses in their designation.

Crypto inflows to sanctioned entities and jurisdictions comprised 61.5% of all illicit transaction volume, representing $14.9 billion in transaction volume in 2023.

According to the report, in 2023, crypto-linked OFAC sanctions shifted toward groups and individual actors and away from major darknet markets like Garantex and Hydra, as well as mixers like Tornado Cash.

The list of sanctioned individuals linked to crypto includes the North Korean hacking group Kimsuky, crypto mixer Sinbad.io, Russian national Ekaterina Zhdanova and the Gaza-based MSB Buy Cash.

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The report did, however, present some more positive figures, including a year-over-year decline in revenue from crypto-based scams. Although scams remain one of the biggest drivers of crypto-based crime, with $4.6 billion in revenue for 2023, the figure was down from the previous year’s $5.9 billion.

Crypto scam revenue from 2019 to 2023. Source: Chainalysis “2024 Crypto Crime Report”

Nonetheless, 2023 saw a rise in new types of scams, including romance scams — also known as pig butchering scams. These types of scams more than doubled in revenue year-over-year, with data indicating a growth of 85x since 2020.

The Chainalysis report estimates that romance scams have the “worst impact on victims of all scam types” due to the average payment size. The report reveals that 2023 also saw a rise in the prominence of approval phishing scams.

Average payment size by scam type. Source: Chainalysis “2024 Crypto Crime Report”

Jardine said romance scams are rising because “they are effective — scammers are nothing if not opportunistic.” He adds:

“These scams take weeks or months as scammers look to gain the trust of their victims. Users who are not aware of the signs to spot scams can easily fall prey.”

When asked about any insights for users to avoid scams and navigate crypto-linked cybercrime in 2024, Jardine said:

“Creating a safer and more trustworthy on-chain environment requires action by various public and private sector actors as well as individuals themselves.”

He said in the case of scams, “individuals can help to minimize their risk by being cautious in their on-chain and online interactions,” while other actors in the ecosystem can help identify the on-chain footprints of scam networks, and law enforcement “can work across jurisdictions and with private sector actors to attempt to recover funds stolen from victims.”

Jardine also emphasized the importance of using services that actively emphasize security in the decentralized finance space. “Good digital hygiene, especially in terms of password and seed phrase management, is also crucial,” he said.

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