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Threat Intelligence

5/25/2021
05:35 PM
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Russia Profiting from Massive Hydra Cybercrime Marketplace

An analysis of Bitcoin transactions from the Hydra marketplace show that the operators are locking sellers into Russian exchanges, likely fueling profits for local actors.

Sales on a Russian-language Dark Web marketplace known as Hydra have skyrocketed in the past four years—with more than $1.4 billion in transactions in 2020, up from less than $10 million in 2016—likely due to its securing tacit consent of Russian officials, new research shows.

Run by a loose confederation of about a dozen operators, Hydra acts as a forum for sellers of narcotics and illegal services in Russia and nine other former Soviet states, according to the report from Flashpoint and cryptocurrency analyst firm Chainalysis. While other Russian-speaking cybercriminal marketplaces have had to contend with competitive attacks and law enforcement takedowns, Hydra has managed to dodge such attention.

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Whether that is just happenstance or collaboration is not clear, says Andras Toth-Czifra, a senior analyst with Flashpoint.

"We cannot offer you direct connections, so we can't say that Hydra is connected to this, or that, particular Russian government official," he says. "But, with an organization as large as Hydra, there is the suspicion that the longer they continue relatively undisturbed, the more likely it gets that there has to be a connection to authorities that allows this."

The Hydra Dark Web market has seen massive growth in the past four years, while an early competitor—the Russian Anonymous Marketplace, or RAMP—shut down in 2017. The operators of RAMP had a reputation for targeting their competition using DDoS attacks and outing other operators by stealing and publishing their data. 

In addition, the operators behind Hydra have made shifting money out of the marketplace more difficult and have forced sellers to cash out currency for Russian fiat currencies, such as Yandex Money and Qiwi. 

The report concludes that it is likely that Hydra's success makes "regional financially incentivized stakeholders the only plausible explanation."

The moves to limit the pathway that sellers can take to turn money in their Hydra accounts into currency are some of the most strict that the researchers have seen to date, Flashpoint and Chainanalysis stated in the report.

Cryptocurrency funds owned by sellers have to be exchanged through regional payment and transfer services. Chainanalysis conducted a blockchain analysis of Hydra crypto transactions, confirming that the vast majority of funds exiting the service are pushed through the local financial organizations. 

"Sellers must not only first convert their Hydra earnings into Russian fiat currency, but also face similarly tight constraints with the payment services and exchanges they are permitted to use to do the cryptocurrency conversion," the researchers stated in a blog post. "Perhaps unsurprisingly, the select few regionally-operated exchanges and payment services that are permitted are all exclusively or primarily based in Russia and Russian-friendly Eastern European countries." 

The restrictions have led the vendors to seek out workarounds. While Hydra limits sellers to keeping a balance of approximately US$10,000 and require that they have a minimum of 50 transactions 

"Basically, to withdraw money, it goes from Bitcoin into Yandex Money or another fiat currency," says Vlad Cuiujuclu, team lead at Flashpoint. "You have to be an established reliable seller on the marketplace, and you must maintain a wallet with enough funds."

Money Trail Mystery

The regional nature of Hydra transactions makes it very difficult to track the path of the money, the researchers say. Once a purchases buys a good or service, the money trail essentially "goes dark," the researchers stated. Transfers into Russian fiat currencies sever any remaining connection between the dark marketplace and the sellers.

Without local law enforcement interest in shutting down the marketplace, there is very little chance of tracking the destinations of the transactions, Cuiujuclu says.

"Our assessment is that if Russian law enforcement wanted to interfere in any shape or form, they could, " he says. "But a lot of things in Russia are actually tied to corruption, so the chances are that some law enforcement are benefitting from this marketplace."

Veteran technology journalist of more than 20 years. Former research engineer. Written for more than two dozen publications, including CNET News.com, Dark Reading, MIT's Technology Review, Popular Science, and Wired News. Five awards for journalism, including Best Deadline ... View Full Bio
 

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