Largest darknet market shut down by US, German authorities

Started in 2015, Hydra allegedly offered a wide variety of illegal goods and services to mainly Russian-speaking countries.

US and German officials have seized what they described as the world’s largest and most prominent darknet market, which traffics in illicit goods and services.

The Hydra Market’s servers were shut down and cryptocurrency wallets containing US$25mil (RM105.46mil) worth of Bitcoin were confiscated by German police on Tuesday. The US Department of Justice announced criminal charges against Dmitry Pavlov, a 30-year-old Russian resident, for conspiracy to distribute narcotics and conspiracy to commit money laundering in connection with his operation and administration of Hydra’s servers.

The US Treasury Department, meanwhile, announced sanctions against Hydra Market, and a "ransomware-enabling” virtual currency called Garantex, which mostly operates out of Russia.

"The Department of Justice will not allow darknet markets and cryptocurrency to be a safe haven for money laundering and the sale of hacking tools and services,” said Deputy Attorney General Lisa Monaco, in prepared remarks.

Started in 2015, Hydra allegedly offered a wide variety of illegal goods and services to mainly Russian-speaking countries. Its wares included hacking software, fake IDs and illegal drugs such as heroin, cocaine and LSD, which were openly advertised on the site, according to US officials.

In addition, Hydra offered a "robust array” of money laundering and "cash-out” services to wash illicit proceeds, authorities said. In 2021, Hydra accounted for about 80% of all darknet market-related cryptocurrency transactions, and since 2015, it has received approximately US$5.2bil (RM21.93bil) in cryptocurrency, according to the Department of Justice.

Garantex, the virtual currency exchange, was founded in 2019 and originally registered in Estonia. The majority of its operations are now carried out in Moscow, according to US officials.

More than US$100mil (RM421.8mil) in Garantex transactions were associated with illicit actors and darknet markets, including US$6mil (RM25.31mil) from the notorious Russian ransomware gang Conti and about US$2.6mil (RM10.97mil) from Hydra Market, the officials said.

The Treasury Department actions are the latest by the US and its allies to pursue hackers and the infrastructure that helps them launder their ill-gotten profits.

Last September, a cryptocurrency broker that the Biden administration considered a key cog in the ransomware epidemic, Suex OTC, become the first crypto exchange to be blacklisted by the US. Two months later, a virtual cryptocurrency exchange called Chatex was sanctioned.

"The global threat of cybercrime and ransomware that originates in Russia, and the ability of criminal leaders to operate there with impunity, is deeply concerning to the United States,” said Treasury Secretary Janet L. Yellen, in prepared remarks. "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.”

Darknet markets sell a variety of illegal goods, and they often accept virtual currency as payment because it is believed to be difficult to trace, according to the Treasury Department.

Many of the hacking gangs have been traced to Russia, which US officials have accused of providing safe haven for them. Garantex, for instance, operates out the same Moscow office building, Federation Tower, as Suex and Chatex, the two entities that were sanctioned last year. – Bloomberg

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