- German police have shut down Hydra, the world’s largest dark web marketplace
- The authorities acted on a tip off received last year and spent months locating the servers
- Police also seized $25.3 million worth of bitcoin
German police have shut down the world’s biggest dark web marketplace, Hydra, and seized €23 million ($25.3 million) worth of bitcoin. A months-long investigation following a tip-off led investigators to the location of the Hydra servers, which were turned off to be replaced by a seizure notice. Cryptocurrency exchange Garantex has also been sanctioned for facilitating the laundering of illicit funds on behalf of the site, which held records of 17 million customers and more than 19,000 seller accounts and which are now in the hands of the authorities. The closure will be a feather in the cap for German authorities who must have been embarrassed to learn that the illegal global market was being operated in their territory.
— Chainalysis (@chainalysis) April 5, 2022
Tip-off Led to Hosting Company
Ever since Silk Road launched in 2011, illicit marketplaces have become something of a household term, describing sites that sell everything from drugs to hacking code. Hydra launched in 2015 and had grown to become the largest in the world, but a tip off to German authorities in July 2021 led them to believe that the site’s servers could be hosted in the country.
After months of investigation, police identified the hoster, a so-called ‘bullet-proof hosting’ company, which is one that doesn’t audit the content customers put on its servers. They then secured a court order to force the hosting company to comply with a takedown order, resulting in Hydra being taken offline and its servers seized.
OFAC Sanctions Hydra and Garantex
Shortly after the news broke, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced sanctions on Hydra and Garantex, the latter of which has been accused by Chainalysis of wantonly abetting criminal enterprises. OFAC also used the opportunity to point the finger at Russia in the process, noting similarities in its case against another crypto exchange, Suex:
Today’s action against Hydra and Garantex builds upon recent sanctions against virtual currency exchanges SUEX and CHATEX, both of which, like Garantex, operated out of Federation Tower in Moscow, Russia. Treasury is committed to taking action against actors that, like Hydra and Garantex, willfully disregard anti-money laundering and countering the financing of terrorism (AML/CFT) obligations and allow their systems to be abused by illicit actors.
Hydra customers will likely not be targeted by authorities combing through the data, although large scale sellers and any identified administrators certainly will be. The bitcoin will likely be auctioned off later this year, given that there are no defendants to pay out.
The seizure of Hydra further reduces the options for illicit goods sellers, with more and more enterprises being taken offline and the pool shrinking.