Darknet markets, where people can browse and buy illicit drugs and forged documents, are not going anywhere. They remain highly popular and involve transactions totalling over a billion dollars. Darknet markets frequently rise and fall, with their closure seeming inevitable. The way that highly popular darknet markets cease to be, however, tends to be abrupt – spelling bad news for vendors and buyers.
Often, darknet markets are hit by an exit scam, whereby the admins of the market close up shop, exiting with bitcoins and other cryptocurrencies that they were holding in escrow. The admin at Empire Market, previously the largest darknet market, allegedly exit scammed in August 2020. The amount they ran off was believed to be $30m. The biggest exit scam so far involved Evolution Marketplace, with the administrators Verto and Kimble making off with $12m worth of bitcoin.
Exit scams may occur abruptly or admins may stop shipping orders while taking new orders, so as to maximise the funds they can run off with. Government bodies can also shut down darknet markets. We saw this with the FBI’s closure of Silk Road in 2013 and, more recently, with the takedown of DarkMarket, an international operation involving several European countries and the United States, and supported by Europol.
The Demise of a Darknet Market Isn’t Always Disruptive
The way White House Market disappeared was different. The admins closed down the market, saying they had reached their goal and so would be retiring. They disabled user registration and ordering but everything else (including withdrawals of funds) was working as usual. The market was kept online for a limited time until open orders were finalised, disputes handled, and coins withdrawn.
Because the admins retired, instead of the site being shut down or exit scammed, vendors did not lose tens of thousands of dollars (as many do), nor did buyers lose large sums of money or fail to receive orders they paid for.
The climate of darknet markets is one of unpredictability and uncertainty (given the history of market closures). While the demise of the White House Market was, no doubt, an inconvenience to many vendors and buyers, many still see the admins’ approach as scrupulous.
In their retirement letter, the White House Market team stated (when the market was still up and running):
All market rules are still in effect so users should not try to take advantage of the situation and scam, the feedback system is still working and will be shared with Recon and other markets. Because this week’s featured listings and stickies won’t generate any revenue, vendors who paid for them will be refunded via their market wallet. Vendors can now advertise the markets where they operate on their vendor profiles however direct contacts are still disallowed.
Many vendors and buyers see this approach as a respectable model for other darknet market teams to follow. However, since these administrators – like the admin of other markets – have financial goals they are trying to reach, this does mean there will always be an element of uncertainty about the lifespan of one of these sites.
We don’t know exactly how much money the White House Market founders made since launching the site in August 2019. They charged a 4% commission on all sales. Nicolas Christin, a computer scientist at Carnegie Mellon University, estimated that the market facilitated at least $35m in sales. This means the administrators’ earnings could have been at least $1.3m over the two years the site was up. However, sales could have reached $120m, in which case the site’s administrators took home nearly $5m.
Darknet markets don’t exist for long: they generally stay up for one to three years. Yet many exist for only months and it is rare for any to continue operations for more than a few years.
We can learn from White House Market that, even when a market is highly secure and thriving, it can still make sense to close the market at its peak. If an IP address is captured once, it can spell disaster. So it is perfectly rational for platform owners, like those of White House Market, to quit while they’re ahead.
Measures Can Be Taken to Prevent Exit Scams
White House Market’s decision to go walletless disincentivised both the administrators and vendors from carrying out an exit scam. This decision was unusual. You don’t really tend to see an essentially walletless market. The result was that users never kept a cryptocurrency wallet on the platform. They simply paid for services or goods as they came up.
White House Market’s High Level of Security
Despite never reaching the peak trading volumes of more famous darknet markets such as Silk Road and Alpha Bay, White House Market still established itself as one of the most popular markets. One reason for its popularity was its high level of security. This is partly why the platform’s dedicated user base was shocked and disappointed to see the announcement of the market closing on 1 October 2021.
Like other darknet markets, White House Market was accessible only on anonymity browsers like Tor and I2P. Some of the market’s security tactics included encoding all communications with Pretty Good Privacy (PGP) encryption. Not all markets enforce encryption in these communications, which puts vendors and buyers at risk.
The platform founders also popularised the use of two-factor authentication (2FA), which means that after users enter their username and password, which adds another layer of security.
A key security feature of the market was that the only form of cryptocurrency that could be used was Monero. This made all transactions close to untraceable (but not completely untraceable, as Monero claims). The sender, receiver, and amount of Monero transactions are hidden through the use of three technologies: Stealth Addresses, Ring Signatures, and RingCT.
Other darknet markets don’t enforce such stringent security protocols, as they might feel they’re too complex for many users. But, as we saw, buyers did not seem to mind following White House Market’s rules. In fact, the high level of security involved would give many users greater peace of mind compared to using other markets. Besides, PGP and XMR (Monero) don’t really take long to learn.
The Strictest Protocols Don’t Stop Interference From Law Enforcement
What we learned from White House Market is that it doesn’t matter if you have the strictest on-platform security protocols in place; users can still face interference from law enforcement. This happened to Paul Engstrom, a 45-year-old Las Vegas man who was one of the most prolific cocaine vendors on White House Market.
He allegedly ran a thriving drug operation, two stash houses, and a team of dealers. Engstrom set up Monero for all his transactions and used cryptocurrency mixers (or tumblers) to improve the security of his cryptocurrency transactions. He allegedly sold at least 20 kilos of cocaine at three times its street price in Las Vegas, generating an estimated $1.9m in just four months in 2021.
Even the most careful dark web transactions can be investigated by law enforcement and traced back to specific individuals. For example, Engstrom allegedly used a cryptocurrency-to-cash exchange called BitLiquid to convert his earnings to US dollars. One of these transactions triggered a currency transaction report (CTR) because it was over $10,000. This CTR allowed investigators to trace Engstrom’s deposits to his personal crypto wallets totaling $3m.
“Whether you use Monero doesn’t help you [when you cash out]. Unexplained sources of income coming from crypto wallets are always a red flag,” says Christin.
White House Market’s Brand of Ethics
Vendors on White House Market also had to abide by a number of rules if they wanted to trade on the platform. The market banned the sale of items like fake Covid vaccine cards, child or animal pornography, deadly weapons, ‘hitmen services’, and fentanyl, a cheap and powerful synthetic opioid that is lethal in tiny doses, and which has been driving the opioid epidemic in the United States. Other marketplaces, such as Hansa Market and Alpha Bay, also banned the sale of these items.
White House Market facilitated the sale of illegal drugs, of course, which many will not necessarily see as ethical. Many drugs sold can still be dangerous and with the potential for abuse. And since the market, like any other, does not have age restrictions due to its underground, illegal status, these drugs could be bought by young, vulnerable individuals.
On the other hand, Jamie Bartlett, author of The Dark Net, has observed that buying drugs on the darknet is generally safer than buying them on a street corner. Many streets drugs are adulterated or missold, which increases the risk of an adverse reaction. Given that darknet markets feature vetting and reviews, this kind of behaviour can be mitigated. Outside the context of illicit drugs, however, stolen credit card information and forged documents were still available to purchase, which is clearly morally problematic.
The lasting impact of White House Market will be that it established a higher industry standard for security and customer service. It made transactions harder to trace and provided a smoother experience for users. The rebooted AlphaBay now accepts only Monero while also running its own internal Monero mixer, adding another layer of security. Meanwhile, the darknet market Monopoly is walletless and gives users the option to purge all their order data. Finally, the market Dark0de Reborn has a mission statement where it places an emphasis on “consumer empathy” and “user experience”.
White House Market may be no more, but its influence lives on.
