The crypto industry continues to grapple with cybercrimes, and according to a new report from blockchain analysis firm Chainalysis, darknet markets are one of the two categories that have seen an increase in revenue in 2023.
Released on February 29, the “2024 Crypto Crime Report” by Chainalysis reveals that darknet marketplaces generated at least $1.7 billion in revenue in 2023. This marks a rebound from the previous year when authorities shut down Hydra, the world’s largest darknet marketplace.
Although no single marketplace has replaced Hydra, the report highlights the success of smaller marketplaces that cater to specific niches and have developed more specialized roles. Leading the pack is Mega Darknet Market, which saw over $500 billion in crypto inflows.
However, the revenue from darknet markets has not yet reached the peak levels seen during Hydra’s reign. The report explains that the phenomenon of niche darknet marketplaces competing for market share is not new and has been observed after the closure of other major marketplaces like the Silk Road and AlphaBay.
In addition to the increase in revenue from darknet markets, 2023 also witnessed a significant rise in crypto-linked sanctions by the United States Office of Foreign Assets Control (OFAC). The report states that there were a total of 18 sanctions on individuals or entities, all of which included cryptocurrency addresses in their designation. These sanctions accounted for 61.5% of all illicit transaction volume, totaling $14.9 billion in 2023.
The report highlights a shift in crypto-linked OFAC sanctions away from major darknet markets like Garantex and Hydra, as well as mixers like Tornado Cash. Instead, the focus has shifted towards groups and individual actors. The list of sanctioned individuals includes the North Korean hacking group Kimsuky, crypto mixer Sinbad.io, Russian national Ekaterina Zhdanova, and the Gaza-based MSB Buy Cash.
On a positive note, the report reveals a decline in revenue from crypto-based scams compared to the previous year. Although scams remain a significant driver of crypto-based crime, generating $4.6 billion in revenue in 2023, this figure is down from $5.9 billion in the previous year.
However, 2023 also saw an increase in new types of scams, including romance scams, also known as pig butchering scams. These scams saw a more than doubling in revenue year-over-year, with an 85x growth since 2020.
The report emphasizes that romance scams have the worst impact on victims due to the average payment size. Additionally, approval phishing scams have become more prominent in 2023.
Eric Jardine, cybercrime research lead at Chainalysis, attributes the rise in romance scams to their effectiveness, stating that scammers are opportunistic. When asked about insights to navigate crypto-linked cybercrime in 2024, Jardine advises individuals to be cautious in their on-chain and online interactions to minimize their risk. He also highlights the importance of identifying the on-chain footprints of scam networks and emphasizes the need for collaboration between law enforcement and private sector actors to recover funds stolen from victims.
Jardine further emphasizes the significance of using services that prioritize security in the decentralized finance space and practicing good digital hygiene, especially in terms of password and seed phrase management.