In today’s age of Internet and innovation, it comes as no surprise that new technologies are also being used for more nefarious reasons.  For example, with the rapid innovation of wireless technologies, mobile applications, and the Internet of Things, experts have now also seen the reemergence of the digital black market.

What is the Digital Black Market?

While the black market has always existed on the Internet in some form or fashion, the most infamous presence of the black market on the Internet was what many referred to as the “dark web” or “dark net,” which usually meant a website hosted on untraceable and anonymous networks like Tor or l2P.  This digital black market would offer digital access and allow digital purchasing of illicit products and services that many would not dare to attempt to procure in the real world.  The dark web offered for sale both goods and services that would include, for example, stolen and pirated software, pornography, drugs, pharmaceutical pills, false identification papers, and even firearms or assault weapons.

While the dark web websites were usually quite basic and fundamental in appearance, they all still had the requisite functionality important to any Internet web-market portal such as infrastructure that supported private communications, buyer/seller reputation tracking, and sophisticated escrow services for payment, and forums in which both merchants and buyers could contact and communicate with each other.  At the same time, having such a centralized web portal often made these black markets the target of sting operations and law enforcement takedowns.

How Tech and Crypto Helped Revamp the Digital Black Market

With the explosion of cryptocurrency and mobile applications, however, the digital black market has reinvented itself.  Now, merchants are able to use more decentralized technology to operate invite-only transactions through mobile messaging programs like Telegram.  If the buyer becomes a repeat customer, they can be given different and unique messaging contacts that are different for each purchase and never tied to shared, permanent channels, which make these transactions much less vulnerable to law enforcement takedowns.

These mobile messaging platforms not only make these transactions more mobile, but it also allows customers to reach suppliers at any time of the day.  And because black market dealers and buyers are no longer tied to one website or network such as Tor or l2P, even more dealers and customers have come online.   Now, simply the use of a virtual private network or (“VPN”) may offer enough anonymity.

The Evolution of Dropgangs

Another new emerging trend is the use of “dead drops,” which synthesizes the “dead drop system” and Internet purchases into the “real world.” Now, sellers are able to leave their illicit goods hidden in very public venues such as parks or town squares so that customers may retrieve their goods quickly and without ever including third-party parcel services.  This innovation allows both customer and dealer to avoid the need to share any sensitive location data or traceable address information with each other, and likewise, without using the postal system of the respective country, buyers and sellers actually may often avoid additional criminal charges because they do not violate the specific laws that pertain to the use or transit of illicit goods through a nation’s postal system.

The dealers that use such “dead drops” are now referred to as Dropgangs by experts in the field.  And while some merchants may still prefer to remain one-man operations, Dropgangs have allowed for the reintroduction of more sophisticated crime structures that operate in hierarchal structures.  Similar to a pyramid or vertical structure, the bottom tier is the distribution level.  Above the lowest tier is the second level, the sales level.  And lastly, at the top is the procurement level and usually represents the main, organizational head.  Thanks to the Internet and mobile messaging, these layers may never have to truly interact with each other, never see each other’s faces or know real names, and may truly never have any information on the other tiers if apprehended.

While this has become a fascinating phenomenon and new challenge for law enforcement across the globe to tackle, only time will tell whether or not law enforcement will be able to innovate quickly enough to catch up to the dealers or if the digital black market and Dropgangs will only become more prominent.

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Klemchuk LLP is a litigation, intellectual property, transactional, and international business law firm dedicated to protecting innovation. The firm provides tailored legal solutions to industries including software, technology, retail, real estate, consumer goods, ecommerce, telecommunications, restaurant, energy, media, and professional services. The firm focuses on serving mid-market companies seeking long-term, value-added relationships with a law firm. Learn more about experiencing law practiced differently and our local counsel practice.

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