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Frauding a Fraudster

posted on: Fri Nov 10 2017

“Exit Scam Fears as Darknet Giant AlphaBay Goes Offline”

What’s an Exit Scam? An exit scam is when the operators of a darknet marketplace abscond with users’ cryptocurrency (usually Bitcoin).

What’s AlphaBay? AlphaBay was the world’s largest darknet marketplace, with 225,000 – 350,000 listings and $450 million in transactions for drugs, weapons, stolen credit cards, hijacked accounts, pilfered identities, and other illegal goods.

In this case, criminals using AlphaBay got robbed by other thieves (criminals running AlphaBay) in an exit scam. As it turns out, the reason AlphaBay went offline was not because of an exit scam, but because it was shut down by legal authorities.  

Of course, the reason why so many criminal users believed they had been victimized by AlphaBay was due to the fact that exit scams are not uncommon in the darknet marketplace underworld.

Evolution. The operators of this site, a successor to the notorious darknet site Silk Road, made off with an estimated $12 million in 2015. In a huge stroke of irony, one of the selling points of Evolution was that it sold goods via escrow so that buyers wouldn’t have to worry about being defrauded by sellers. A user named “NSWGreat” who claimed to have “admin access to see parts of the back end” posted this warning on Reddit as the site operators Kimble and Verto were in the process of stealing the thieves’ money:

“The admins are preparing to exit scam with all the funds. Not a single withdrawal has gone through in almost a week. Automatic withdrawals has [sic] been disabled which is only doing [sic] on rare occasions … Confronted Kimble and Verto about it, they confirmed it and they're doing it right now.”

Hansa. After AlphaBay was shut down in July, the Hansa darknet marketplace saw an 8x increase in traffic. Unbeknownst to criminals, however, the Dutch National Police had taken it over in June after arresting two men in Germany and seizing servers in Germany, The Netherlands and Lithuania. After monitoring activity for a month, the authorities shut it down, saying the bust would lead to hundreds of new investigations. No, not an exit scam, but all the thieves lost all their money. And many will go to jail.

TradeRoute. With Hansa shut down, fraudsters scrambled to find a darknet marketplace. Many wound up at TradeRoute. In early September, a phishing fraudster began extorting payments from the operators of TradeRoute after identifying a vulnerability in their backend database. The operators paid their blackmailer for about a month, then took advantage of a series of DDOS attacks that temporarily took down TradeRoute (along with other darknet marketplaces) and exit scammed.

Oasis. In 2016, this darknet marketplace exit scammed, making off with approximately $700,000.

East India Company. This darknet marketplace disappeared after encountering a number of problems, including being hacked in August of 2015 and losing 30 Bitcoins (approximately $6,000 at the time). After the site became inaccessible in early 2016, users noticed their bitcoin wallets being drained. The East India Company exit scam purportedly ranks as one of biggest darknet market exit scams, but as with so many darknet marketplaces, much is obscured, exaggerated, or simply unknown. Well, except that the criminals lost their bitcoin.

So much for the proverb “honor among thieves.” Perhaps it should be revised to “NO honor among thieves.” 

Prosecuting the Perps

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