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Drugs, porn, and counterfeits: the market for illegal goods is booming online

silk road screenshot

In the beginning of February a remorseful Paul Leslie Howard, 32, stood in front of a judge in Melbourne and pleaded guilty to charges of selling meth, LSD, amphetamines, and pot, as well as importing distribution-level quantities of MDMA and cocaine.

Howard, a heavyset man who worked the door at night clubs, seemed genuinely remorseful. He was not a career drug dealer. He and his wife were having money problems when he read an article about Silk Road, a secret online black market where thousands of drugs are for sale. He registered for an account a year ago. Thanks to the site, he’d been living like a kingpin for about six months.

"He wanted to be the big man around town and for a while he got that, because he supplied the best party drugs around," said Eiley Ormsby, the Australian journalist who runs a blog called All Things Vice.

"He supplied the best party drugs around."

Howard was convicted of running what the judge called a "smorgasbord drug-market operation." He was sentenced to three years and six months in prison, making him the first known Silk Road user to be convicted.

Silk Road is a simple storefront resembling eBay in 1998. It has a long, cryptic address that can only be accessed through Tor, a decentralized network of servers that encrypt and relay traffic in order to obfuscate a user’s online activity.

Silk Road is run by the pseudonymous Dread Pirate Roberts, along with an unknown number of engineers and customer service reps. Buyers and sellers on Silk Road have always been maximally paranoid about police crackdowns, and the site’s not-infrequent outages never fail to prompt whispers of an FBI takeover. Still, the black market has thrived, growing to contain more than 11,000 public listings, which sell everything from drugs to art and knockoff apparel. That’s up from 340 in June 2011, when a Gawker article first brought mainstream attention to the site.

What’s more, Silk Road is no longer the only digital drug bazaar in town. A number of competitors have sprung up, with three new sites launching in the last three months. In February, Atlantis opened its doors with an aggressive marketing campaign, posting announcements in forums around the web and attempting to recruit Silk Road sellers by offering three months of commission-free trading for top sellers from other markets.

Black_market_reloaded

Black Market Reloaded, one of the larger stores on the internet's illicit underground.

Silk Road is no longer the only digital drug bazaar in town

In March, Sheep Marketplace came on the scene; its operators say they’ve signed up 5,000 members. The latest newcomer is BuyItNow which, according to Ormsby, is still a startup with just 10 listings.

Black Market Reloaded is probably Silk Road's biggest competitor, with 8,551 public listings. Its operators claim to have booked $400,000 in revenue last month. Black Market Reloaded took off in August of 2012, after Silk Road stopped selling guns and shut down its offshoot, The Armory. Since then, Black Market Reloaded has become the go-to market for people with "no moral restrictions at all." The fast-growing Russian Anonymous Marketplace, or RAMP, is another serious contender for market share in the burgeoning digital underground.

The "deep web," as the part of the internet accessible only by Tor is called, has always hosted niche black markets. Operations like the Deep Store, which sells Apple products at a 50 percent discount, have been around for years. Another deep web regular, Buttery Bootlegging, simply advertises, "I'm good at stealing," and offers to pick up expensive items using the five-finger discount. However, the all-purpose bazaar is a relatively new phenomenon.

These sites also traffic in porn, counterfeit money, untaxed cigarettes, and tools for hackers and thieves

These sites don’t sell just drugs. They also traffic in porn, counterfeit money, untaxed cigarettes, and tools for hackers and thieves. There are some legal items, too, including a trove of acid art. The US Drug Enforcement Agency has said it is investigating Silk Road, and the site is now clearly on the authority's radar in Australia (although a government assessment reportedly said police are struggling to figure out how to deal with it).

These sites are booming in part due to the resilience of Bitcoin, the semi-anonymous currency invented four years ago. Almost all underground Tor marketplaces accept Bitcoin, and many actually require it. Atlantis initially launched supporting only Litecoin, another virtual currency, but gave into popular demand and added support for Bitcoin earlier this month.

For now, Silk Road appears to be the undisputed market leader. But the site had some downtime this week, prompting customers to look elsewhere. "Sometimes it’s nice to browse the new guys," said one Reddit user, noting that the new sites offer deals and better customer service for vendors who are trying to establish themselves. Black Market Reloaded and others may never take the lead, but for now the increased competition makes it a buyer’s market.

Correction: An earlier version of this post stated that Eiley Ormsby wrote the article that introduced Howard to Silk Road. Howard's lawyer points to Ormsby's article, but the piece is dated after Howard registered his account, suggesting it was another article.

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