‘IT HAS THE capacity to change everything – the way we work, the way we learn and play, even, maybe, the way we sleep or have sex,’ wrote British entrepreneur and author Matt Symonds of his prediction for the internet in The Economist in 1999. ‘Within a few years, the internet will turn business upside down. Be prepared – or die.’
Since then, there has been a relentless trend of customers taking their business online, away from bricks and mortar, but few would have imagined that the corner drug dealer was at risk of the same fate. Yet 2011 saw the first mass-marketed point-and-click illegal drugs bazaar, where people could pop marijuana, ecstasy or cocaine into a basket as easily as if they were shopping on Amazon. Now, according to the Global Drug Survey, the number of people buying drugs online is increasing exponentially each year.
In the days when getting online meant enduring the screech of the dial-up tone, and inelegant search engines returned weird and unhelpful results minutes, rather than seconds, after typing in a query, Symonds’ prediction was bold, but it turns out he underestimated the impact of this newfangled technology. Not even the most forward-thinking analysts could have dreamed that twenty years later the internet would have revolutionised not only the way we enjoy food, travel, sleep and sex, but also how people get high, and the business model of the drug dealers who cater to them.
Australians are some of the highest users of recreational drugs anywhere in the world. Traditionally, friend-of-a-friend networks were the most popular way of procuring marijuana, ecstasy, cocaine or LSD, but plenty of young people were prepared to buy from a stranger at a festival or nightclub. A lucky few found a reliable supplier, someone whom they could visit or who would home deliver, and who was at the end of a distribution chain that invariably began at the docks or manufacturing plant of organised crime.
There was scant opportunity to shop around. Buyers got what they were given, with little idea of what their pill or powder had been diluted with by the time it had reached the end user, or whether another product had been substituted entirely. Complaints could be met with, at best, a shrug or, at worst, a weapon. Drugs were expensive and quality low, but the appetite to procure and ingest them never waned.
Sellers had their own sets of problems. They had to rely on word-of-mouth for business, and every new customer had the potential to be undercover law enforcement. Dealing only in cash meant they were a prime target for robbery, and would then have to answer to someone higher in the chain if they lost product or money. Violence was inevitable somewhere in a drug dealer’s lifetime, and a prison term was probable. Such high stakes meant they needed healthy profits to make the job worthwhile.
‘The internet is helping companies to lower costs dramatically across their supply and demand chains, take their customer service into a different league, enter new markets, create additional revenue streams and redefine their business relationships,’ wrote Symonds in The Economist. Drug dealers had the same incentives to move their business online as legitimate retailers, but they faced significant barriers setting up shop for illegal goods. Deals could be made through sites like craigslist or Gumtree, using code words, and arranging to meet somewhere neutral to exchange cash for drugs, but brazen advertising would quickly be removed or attract police, and the transaction still had the potential for violence.
To maximise the advantages of moving business online, drug dealers had to be able to operate like any other retailer. They had to advertise and attract customers, they had to offer a secure online payment system, and they had to be able to deliver to anywhere in the world.
Customers wanted quality products, ease of use and a dispute-resolution mechanism should things go wrong.
That’s why in 2018, most of the online drug deals reported by the Global Drug Survey were happening on the dark web.
MANY PEOPLE CONFUSE the terms ‘deep web’, ‘darknet’ and ‘dark web’, and use the expressions interchangeably. The deep web is everything that is not indexed by search engines, including pages behind paywalls, password-protected information or closed intranets. Personal information that only you can access through your bank’s website, for example, is part of the deep web. Darknets are anonymity tools that allow people to communicate privately, and which are becoming increasingly important in a post-privacy world, but those same tools provide access to the dark web. The dark web is the collective of sites that can only be seen through a darknet.
It was the development by the US military of a user-friendly darknet called Tor that made the dark web accessible to the masses. Tor was created to protect military secrets and allow for secure communications between the US and their agents in circumstances where they could otherwise expect to be subject to surveillance or have their messages intercepted. In order for it to be effective, it had to be made open source, released to the world at large – otherwise anyone conducting traffic analysis could conclude that any traffic routed through Tor was military communications. Free, legal and simple to download, Tor opens up a browser that looks identical to that used for surfing the internet normally. The difference is, it can access sites that your normal browser cannot; websites where the owner cannot be traced.
The dark web provided the solution to the requirement of illegal businesses to advertise and attract customers. It is the ideal platform for anyone selling illicit goods to display their wares through an online shopfront, without the inconvenience of it being closed down by law enforcement or a law-abiding ISP. More importantly, it meant that websites did not have to operate clandestinely, or by invitation only. Tor enabled drug dealers to advertise openly to the masses, while the people behind their websites remained anonymous, their locality impossible to determine. Customers could browse the stores knowing that their location and usage was hidden from prying eyes of the authorities.
But a shopfront is of little use if there is no way for goods to be paid for and delivered. Electronic transfer systems such as credit cards, PayPal, Western Union or bank transfers all have the potential to be traced. Cash – the traditional payment method of choice in the drug trade – defeats the purpose of transacting online. The payment problem was solved by the game-changing invention in 2009 by a mysterious pseudonymous genius going by the name Satoshi Nakamoto.
Entire books have been written about the cryptocurrency bitcoin. At its simplest level, it is a borderless digital currency, which allows for almost instantaneous transactions from one person to another anywhere in the world. Its value is determined by demand, and it can be created (or ‘mined’) by a computer doing complex mathematical equations, bought on an exchange or purchased from another person. Most importantly for the black market, neither person in a transaction needs to know the identity of the other. It is the equivalent of cash in an online world.
The final hurdle was delivery of illegal goods, and for drugs the simplest solution was the postal system. Personal-use quantities of most drugs were small enough to be hidden in a plain white business envelope, indistinguishable from billions of others circulating the globe. Larger quantities could be disguised in DVD covers or plush toys.
The infrastructure for online drug deals was in place, but the system still wasn’t perfect. A potential buyer would need to know the URL for the store of a dealer who sold their drug of choice and delivered to their country. Unless they had personal recommendations, there was no way of knowing if the sites were legitimate. The sites could easily take the Bitcoin and not deliver the product, claiming it had been lost in the mail, with little fear of repercussions.
In 2011, when a single bitcoin cost less than a dollar, a young Texan economics student living in Silicon Valley came up with the perfect solution to revolutionise the trillion-dollar illicit drug industry.
MOST PEOPLE WOULD never have heard of the dark web had it not been for the rise of the first point-and-click one-stop illicit drugs market, Silk Road. The original and most notorious dark web drugs bazaar was an ambitious project that brought together buyers and sellers of every drug imaginable in much the same way eBay or Amazon does with more mainstream products. Silk Road was marketed to the masses, designed to be easy to find, navigate and, ultimately, purchase from.
At the helm was its founder, originally known as Admin, and later bestowing upon himself the moniker of Dread Pirate Roberts. He set about creating a community as much as a marketplace, with forums where the site’s members could chat about all things drugs, music, philosophy and life in general. Dread Pirate Roberts was prone to rousing epistles about freedom, liberty and sticking it to the man, and he ran a book club where members were encouraged to read and discuss philosophical books.
Before being allowed to sell on Silk Road, vendors had to agree to abide by the seller’s guide, which included the stipulation that anything could be sold, provided its purpose was not to harm or defraud another person. The libertarian ideals of the founder meant that anyone should have the right to decide what goes into their body, but should not be allowed to infringe upon the rights of someone else.
Silk Road remained a modest experiment for the first few months of its life until a feature appeared on online gossip site Gawker on 1 June 2011. The article showed screenshots of the site, which at the time had 343 drugs listings, and included interviews with satisfied customers. The piece concluded that the site was real; the service worked as advertised.
The news was greeted with outrage and disbelief by many, and excitement and curiosity by others. US Senator Chuck Schumer provided Silk Road with unintended legitimacy and publicity when he declared war on the site. ‘It’s a certifiable one-stop shop for illegal drugs that represents the most brazen attempt to peddle drugs online that we have ever seen. It’s more brazen than anything else by light years,’ he proclaimed, calling for it to be shut down immediately, which would seem to be a reasonable demand. But the technology was like nothing politicians or law enforcement had ever dealt with before.
The combination of Tor, bitcoin and drugs created the perfect storm for the introduction of the online mass black market. Far from succeeding in having the site shut down, Senator Schumer’s comments ensured its popularity exploded, and overnight tens of thousands of new members signed up.
Drug dealers from around the world competed with colourful advertisements offering everything from a single ecstasy pill to bulk orders destined to be sold in the real world, and they ran special sales and giveaways to attract new customers. The site’s user-friendly interface was intuitive for anyone accustomed to ecommerce platforms, except instead of books and DVDs, it was marijuana, cocaine or Xanax bars ready to be popped into a shopping basket.
As soon as the buyer submitted the order, Silk Road would hold payment in escrow until the buyer confirmed that the goods had arrived and were as advertised, when they would click to release the funds and, using a five-star rating system, provide feedback on the seller’s customer service, packaging and quality of product. Disputes would wind up with the website’s administrator for arbitration, but more often than not a seller would offer a reship before it got to that point to maintain their five stars.
Sellers had reputations to preserve, so they provided excellent customer service and high-quality drugs to ensure a consistently high rating but, just as Uber drivers can secretly rate their passengers, the sellers could also rate the buyers. Anyone who was difficult to do business with or forgot to release funds from escrow (causing the vendor to wait until the site auto-released much later) was marked down. Too bad a reputation and the most popular vendors would refuse to deal to a buyer, while high-volume customers with a good ranking were rewarded with extra drugs or free express postage.
The one area sceptics queried was delivery. Surely the buyer was taking an enormous risk having drugs delivered in the regular mail? Although the risk was real, it was not nearly as dangerous as outsiders perceived. Sellers were skilled at packaging the drugs to avoid detection, and in the rare incidence of drugs being intercepted the recipient had plausible deniability. How should they know who had decided to send drugs to them? Forensic examinations of their computers would reveal no evidence of any access to the drugs market when Tor was doing its job. In any event, it would be unreasonable to spend such resources on $50 worth of drugs where the buyer had no way of providing any information on their source other than the name of an untraceable website.
The shift online had clear advantages for both buyers and sellers of illegal drugs. Anonymous online transactions eradicated any threat of violence, and the feedback system and vendor’s desire for repeat business meant an invariably higher-quality product than what was available on the street (something later confirmed by the FBI when it published test results of drugs bought in an attempt to determine their origin). Users were also armed with information thanks to the lively forums, where members shared information, stories and test results of the wares of the various sellers.
Perhaps the most astonishing development was that Silk Road had its own physician on staff, ready to dish out free medical advice to drug users. In between running his busy practice and working in harm reduction for a Spanish NGO, Dr Fernando Caudevilla provided expert personal advice on drug use and abuse to Silk Road’s anonymous membership. His username was, appropriately, ‘DoctorX’ and he was inundated with questions about drug safety, which he answered with his refreshing, straightforward holistic approach. Recognising the value that someone like Caudevilla brought to the site, Dread Pirate Roberts paid him a stipend, in bitcoin, as thanks for the service he provided to Silk Road’s members.
For more than two years, Silk Road grew rapidly in every metric: number of customers, turnover, profit and notoriety. Nobody embraced this new way of purchasing drugs more enthusiastically than Australians. Having become accustomed to expensive, low-quality drugs purchased after passing through several hands, often diluted at each step, Australians suddenly had direct access to overseas vendors close to the source for even the smallest orders. Australians soon became the largest users of the site per capita of any country in the world. Silk Road put on an Australian staff member, in addition to those already servicing the US and Europe, to provide customer service in the Down Under time zone.
DREAD PIRATE ROBERTS developed a cult-like following among the site’s million members as a peace-seeking libertarian who provided recreational drug users with access to affordable, high-quality drugs in a violence-free environment. It wasn’t until it all came crashing down that they heard a different story.
On 3 October 2013, the FBI swooped on Ross William Ulbricht, twenty-nine, in the sci-fi section of a small library in Glen Park, San Francisco, as he chatted online. The arresting officers had fingered the easygoing Texan as being the kingpin of the largest online drug-dealing empire in history. They were left in no doubt when they seized his laptop, where he was logged into the master administration panel of the site. The computer contained a treasure trove of information, including chat logs, bitcoin wallets and identification documents of members of his staff. The latter led to the arrest of his mentor and three lieutenants, including Australian forum moderator, Peter Nash.
The chat logs revealed that behind the scenes had been anything but smooth and peaceful, as the Silk Road team battled bitcoin thefts, paid off hackers and extortionists, received intelligence from corrupt officials and, most alarmingly, ordered and paid for hits on people who threatened to expose the site (although no murders were ever carried out).
After a three-week trial that had more twists and turns than a thriller, Ulbricht was sentenced to two life sentences without the possibility of parole for the crime of owning and operating the Silk Road website. Australian Peter Nash was extradited to the US, then sent home after a judge pronounced the eighteen months he had served by the time he faced sentencing was sufficient for his crime of being a customer-service operator for the site.
The agencies that participated in Silk Road’s downfall – the DEA, FBI, CIA, IRS, NSA, Immigration and Customs Enforcement, the Postal Inspection Service and local law enforcement (with an IRS agent responsible for finding the smoking gun: a buried email address belonging to Ulbricht) – had worked for years to unmask Dread Pirate Roberts, and proudly trumpeted their success in doing their part for the war on drugs to the press. They estimated Silk Road had turned over US$1.2 billion in its short lifespan. This figure turned out to be grossly inflated thanks to erroneous bitcoin math, but the truth nevertheless contained some mind-blowing numbers. The official data for Silk Road’s operations was a turnover of US$213,888,103, earning the site commissions of US$13,174,896. As Silk Road grew, so did the demand for bitcoin, with its value quickly rising from less than a dollar at Silk Road’s inception to more than US$600 per coin. After Ulbricht’s arrest its value exploded to over US$1,200, making many of those holding the currency instant millionaires.
These kinds of numbers meant Silk Road was a successful start-up by any metric, but with the press preferring to tout the more impressive-sounding US$1.2 billion figure, it was no surprise that newcomers raced to fill the void. The first appeared a month after Silk Road shut down, and over the subsequent years dozens of darknet markets sprung up, many growing to dwarf the size of the original. As in any industry, newcomers were keen to emulate the success and learn from the mistakes of the predecessor.
First, new darknet market owners decided it did not make economic sense to limit what was on offer when there was such a high demand for items such as hacking and ransomware tools, stolen credit cards, personal and financial information, weapons and poisons. Soon such items were being listed for sale alongside marijuana, LSD and heroin, with little care about those who were being stolen from or defrauded.
It was certainly not a great idea for market owners to be enigmatic, idealistic leaders with a devoted following, who served as a beacon for law enforcement. The new business owners stayed in the shadows, hiring public-facing staff without access to the mechanics of the site, or to any knowledge that might compromise the identities of the people behind it. While these PR people were at most risk of being identified through detective work and social engineering (manipulating individuals into divulging confidential information by befriending them or otherwise using deception tactics), their arrest would have no impact on the business.
Unsurprisingly, the new breed of markets, engineered for maximum profit and harbouring no ideological underpinnings, turned out to be run by a bunch of crooks. A centralised market is only as secure as the person who has the keys to customer accounts and escrow. With Silk Road, the honesty of the founder when it came to matters of member money was never in doubt, with Dread Pirate Roberts sometimes personally reimbursing accounts that got defrauded. One after another, new market owners waited until their crypto wallets were filled and then simply took the site offline, taking millions of dollars’ worth of bitcoin with them, never to be heard from again. Other markets were shut down by law enforcement, their owners identified and prosecuted. It was clear that the halcyon days were over, but ever-increasing numbers of people flocked to the dark web, preferring the instability of the online markets to the uncertainty and potential violence of the street.
EVERY TABLOID STORY about what can be bought on the dark web inevitably references weapons, human organs, exotic animals, human trafficking or hitmen. While there are sites for such things on the dark web, few are genuine. For the most part, they’re designed to separate the gullible from their cryptocurrency.
The only products that are viable on an anonymous marketplace are those that are easily transferable and in high demand to a loyal base of repeat customers. Items that have a high probability of detection in transit, such as weapons or pet monkeys, are less likely to do well as items that can be transferred digitally – data, hacking tools and software designed to exploit computer system flaws, premium account logins, credit card, financial or identity information – or that can be easily hidden in normal mail, like drugs. If a customer is going to be a one-off, the seller has no incentive to provide the goods or service once payment has been made. Few people want more than one kidney or need numerous people murdered. Much simpler to take the money and not carry out the crime, as confirmed by Yura, the owner of Besa Mafia, the most profitable murder-for-hire site in history, who has collected nearly a million dollars but has never killed anyone.
The one other area that has proliferated on the dark web is child exploitation. These communities rarely operate on a commercial basis, but rather rely on the sharing of materials among members. Those who want to access more extreme content may be required to prove they are actively abusing one or more children with video or photographic evidence, which helps prevent law enforcement from gaining admission to secretive sections. As they cannot provide child abuse material, they have to wait until they make an arrest and then take over an already existing account in order to gain access to the sites.
The same technology that works for the black markets has provided a ‘safe space’ for deviant communities that can operate openly, are easy to join, and offer robust protection against users being identified and host sites being shut down by the authorities. Unlike the drugs markets, the mere act of visiting a child exploitation site is illegal in most jurisdictions. Worldwide task forces of law-enforcement agencies work together tirelessly to infiltrate the communities and unmask abusers. It is the nature of the dark web, however, that this must be done the old-fashioned way, using traditional detective work and clever social-engineering techniques.
By late 2018, there were still half a dozen Amazon-style markets operating on the dark web, with the largest boasting 73,000 drug listings and 70,000 advertisements for ‘other’ items. However, for many vendors, one-stop centralised markets have fallen out of favour for direct deals due to scams and the attention of law enforcement. Eight years of centralised markets has allowed these vendors to build up a strong client base and, rather than risking their bitcoin with a rogue market operator (and paying the 6 to 10 per cent commissions), they invite customers to deal directly via encrypted messaging apps like Wickr or Signal. They maintain a presence on the markets to acquire new clients, hiring trusted contacts to play a customer-relations role who are paid in drugs or cryptocurrency. These employees act as the face of the business, answer queries and spruik new wares, but do not handle drugs or know the people they work for. Meanwhile, those who actually handle the drugs may have no interaction with clients or online presence at all.
This shift has resulted in the growth in popularity of forums that are dedicated to reviewing various vendors, but not facilitating sales, acting more like Yelp or TripAdvisor. Bitcoin remains the currency of choice on the dark web markets, but many vendors are now favouring the newer Monero, a cryptocurrency with more robust privacy that is said to be untraceable.
No matter what the future holds for the dark web, the greatest disruption to the darknet markets might come from a more unexpected source. The war on drugs is an abject failure, and progressive countries are looking to non-prohibitionist alternatives to dealing with problematic drug use. Dread Pirate Roberts himself was concerned about a future in which currently illicit drugs were legalised, which would bring his multi-million dollar business to a halt, just as it would for anyone involved in the illegal drug trade.
Meanwhile, there is no sign of our appetite for illicit drugs abating any time soon, and postal workers continue to be unwitting drug mules as the corner drug dealer faces a familiar problem of Australian businesses: people would rather buy cheaper products from overseas at the click of a button.
