Bitcoin

World’s largest darknet market Hydra brought down, 543 BTC seized

U.S. and German authorities have teamed up to bring down Hydra, described as the world’s largest darknet marketplace, seizing over $25 million worth of BTC in the process.

The U.S. Department of Justice teamed up with German authorities on an investigation that spanned eight months. Germany’s Frankfurt am Main Public Prosecutor’s Office, Central Office for Combating Cybercrime (ZIT), and Federal Criminal Police Office (BKA) announced the seizure of server infrastructure that supported Hydra as well as 543.3 BTC worth over $25 million at the time of seizure.

Hydra launched in 2015 and since then has been on a steady uptrend, both in terms of the number of customers and the volume of transactions. The growth was also fanned by the shutdown of its rivals including AlphaBay in 2017 and Wall Street Market in 2019. Hydra’s aggressive growth was also greatly aided by its brazen advertising, even on clearnet platforms such as YouTube, where it had several ads. According to cybersecurity firm Ciphertrace, the marketplace also attacked its rivals through DDoS attacks.

It also greatly helped that Hydra was based in Russia, whose authorities have been reportedly unwilling to cooperate with their international counterparts to bring the platform down.

Hydra users could buy just about any illicit thing ranging from illegal drugs such as LSD and heroin to false identification documents and hacking tools and services. Vendors also offered money laundering and cash-out services, which allowed buyers to convert their BTC into various forms of currency. Hydra also had its own in-house coin mixing service to further obfuscate the stolen BTCs’ path as users withdrew their funds. 

Despite being almost purely Russian, the DoJ estimates that Hydra accounted for about 3 in 4 digital currency-related transactions in 2021. Since it launched, the agency claimed it had processed over $5 billion in BTC transactions. German authorities further revealed that it had 17 million customers and about 19,000 vendors at the time of its closure.

In addition to the seizure, the DoJ also announced conspiracy charges to commit money laundering and conspiracy to distribute narcotics against Dmitry Olegovich Pavlov, a 30-year-old Russian national who maintained the servers on which Hydra operated. No arrests have been made as of press time.

“Criminals on the darknet hide behind the illusion of anonymity, but DEA and our partners across the globe are watching. We will continue to investigate, expose, and take action against criminal networks no matter where they operate,” Drug Enforcement Administration’s Anne Milgram commented.

Piling onto the crackdown, the U.S. Treasury Department announced sanctions against Hydra and an associated digital currency exchange which allegedly facilitated the marketplace’s activities.

In a separate announcement, Treasury said that the sanctions against Hydra and Garantex exchange would disrupt malicious cybercrime and other illegal offerings available on the marketplace. Treasury Secretary Janet Yellen said the continued rise in cybercrime that originates in Russia is deeply concerning to the U.S. government.

“Our actions send a message today to criminals that you cannot hide on the darknet or their forums, and you cannot hide in Russia or anywhere else in the world,” she added.

Treasury stated that Garantex operated from the Federation Tower in Moscow, Russia. This is the same building out of which Suex and Chatex exchanges operated. The two were sanctioned by Treasury over their involvement in cybercrime, saying that they allowed hackers and other criminals to cash their BTC out without any AML or KYC programs.

“The virtual currency industry has a critical role to play in implementing appropriate AML/CFT and sanctions controls to prevent sanctioned persons and other illicit actors from exploiting virtual currencies,” Treasury noted.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—a from BitMEX to BinanceBitcoin.comBlockstreamShapeShiftCoinbaseRipple,
EthereumFTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.

New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.

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