AlphaBay’s Downtime Unnerves Users: Another Exit Scam?

On July 5, the largest dark net marketplace globally disappeared, with vendors and buyers unable to access their accounts and any bitcoin or cryptocurrency associated with it. Five days later, on July 10, there is no sign of the marketplace coming back. As the largest dark net market, even dwarfing the infamous Silk Road, the site could be experiencing an attack that is has never experienced before but there are other competing explanations.

While the site could be under maintenance, the administrators usually let vendors know beforehand. Some Redditors have posted link claiming to show that cryptocurrency have been drained from AlphaBay wallets. More than 1,400 bitcoin have been transferred to a new wallet addresses, supposedly linked to AlphaBay but the evidence is not conclusive. Furthermore, the less than punctual response by the site’s admin trappy_AB, which was given more than 24 hours after the site was down, is also depressing sentiment amongst the site’s users.

The leading dark net marketplace saw $600,000 to $800,000 in transactions daily earlier in 2017, according to unpublished statistics from Carnegie Mellon University professor Nicolas Christin. This would make AlphaBay about twice as large as the Silk Road when it was shut down in October 2013.

Another fact that points to an exit scam is the relentless addition of altcoins to the marketplace, most of which, apart from monero, were probably hardly used. In March, AlphaBay announced they would add ether functionality and then on July 1, shortly before the site went dark, Zcash was integrated. By attracting flows of these altcoins and announcing their adoption, AlphaBay may have played a smart strategy of pumping these coins and then stealing them all in one fell swoop.

However, it may be too early to call an exit scam. Others claim that law enforcement may have shut down the site but this is questionable for two reasons; first, it is well known that the people behind AlphaBay are of Russian origin, and most likely have servers scattered around Russia, the Ukraine and perhaps some former Soviet republics. Secondly, the sheer size of the marketplace would make it more likely that law enforcement would not attempt to shut it down completely, but rather, allow it to continue and gather intelligence.

By shutting down AlphayBay, it does nothing to solve the problem but displaces it to another marketplace. The authorities may have changed their tactics in this regard; instead of targeting and taking down an entire marketplace, they may be aiming to take down large vendors, which would make AlphaBay a prime hunting ground for law enforcement due to the economies of scale it has achieved.

Rick Holland, Vice President of Strategy for digital risk assessment company Digital Shadows stated:

“Dark web exit scams are nothing new and are quite common. The Evolution market famously ended with the loss of 40,000 bitcoins. These exit scams are one of the risks when conducting business in criminal marketplaces. The increasing value of bitcoin makes exit scams appealing.”

“These exit scams are often the first assumption when a marketplace goes offline, however there are alternatives including intrusions from other criminals, DDoS attacks from competitors, law enforcement interdictions, and even unannounced site maintenance. The Dream and Hansa markets are likely to benefit from any potential Alphabay demise. Digital Shadows is tracking this development and will provide updated analysis as it becomes available.”

The biggest benefactor of the largest illicit marketplace going down are its competitors, and given the profits involved in the drug trade alone, it is not too much of a stretch to believe that competitors may have paid for a cyberattack against AlphaBay.

Whatever the reason for AlphaBay’s disappearance, they are a host of other marketplaces that will fill the void in the meantime. As with previous attempts to shut down illicit trade or exit scams, users and vendors will jump ship and many have flocked to other sites with decent reputations, such as Dream and Hansa. However, due to the sheer volume of new registrations, Hansa decided on July 9 to temporarily halt new registrations.

Users are also cautioned to be wary if the site comes back online, as many times in the past, sites have reappeared, only to serve as a honeypot of information on vendors and buyers with bitcoin balances, addresses and identities compromised. There has been no official announcement from law enforcement regarding this story, so we will update our readers as the mystery unravels.