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European Prosecutors Launch Project to Combat Online Dark Markets

(@dannybradbury) | Published on October 12, 2014 at 16:44 GMT

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European prosecutors are speaking out about a new pan-European project designed to combat dark markets on the web – and they're addressing bitcoin as a key tool of these illicit bazaars.

The Illegal Trade on Online Marketplaces (ITOM) was initiated by the Dutch Public Prosecution Service, the Openbaar Ministrie.

Kicking off with a meeting in April this year, the project draws together law enforcement from various European countries in an attempt to stop the illegal trade of goods online. Agencies involved include Europol and law enforcement from the UK, Portugal, and Germany.

The project has identified bitcoin as a key pillar supporting illegal trade, and will focus on the digital currency as part of the dark market ecosystem.

Wim de Bruin, a spokesperson for the Openbaar Ministrie, mentioned the value of cryptocurrencies for the global economy, but made a point to address their use in illicit activities:

"We consider the bitcoin and other cryptocurrencies as a good addition to the world of economic trade. Sadly though, they seem to provide great benefits for illegal trade, illegal international money transfers and money laundering.

We hope we can stimulate the ‘bitcoin community', as you call it, to help us keep the bitcoin [system] as free of illegal usage as possible. Our ultimate goal is that the bitcoin system will become as self regulating as possible.”

De Bruin added that the organisation was already talking to bitcoin exchanges and banks, among other third parties.

Multidisciplinary interventions

The ITOM held a plenary meeting on ‘multidisciplinary interventions’ in June. Although de Bruin wouldn’t comment on operational matters, a document published by the Ministrie outlining the project’s focus may give clues as to what these interventions are, or who might be targeted for prosecution.

The document outlines what the group sees as the ecosystem for financial trade, breaking it down into seven main steps: obtaining goods, connecting to the Internet, offering goods for sale, contact with buyers, shipment, payment and financial services to deal with the revenues.

It describes the illegal players in these seven steps, including dealers, bulletproof hosting providers, web admins, website sellers and customers and money mules. The document also outlines a list of partners that the prosecutors presumably want to work with in targeting dark markets. These include ISPs, customs, drug prevention groups, logistics services – and, specifically, the bitcoin community.

In a statement to the Dutch Newspaper Volksrant, the Ministrie highlighted the ITOM as an attempt to target international illegal trade by partnering with countries across Europe. It vowed to take down dark markets, and also to focus on mail and logistics services as the delivery mechanism for illegal goods.

The project’s research may stimulate new cryptocurrency policies at an EU-wide level, de Bruin stated:

"We hope to have a better insight into the effects and necessity of regulations regarding crypto currencies within the EU at the end of the project in 2015. The aim of the project is to advise the European Commission and member states in this matter. With that we also hope to stimulate uniformity between the member states in how they regulate and deal with crypto currencies."

The prosecutor’s response to Volkskrant also suggested that new legislation may be able to increase visibility into bitcoin transactions.

Not everybody's on board

Some members of the bitcoin community were less than happy with the move, seeing it as a direct threat to their own online activities. Mike Gogulski, original creator of the Ross Ulbricht defense fund, says that he doesn’t use dark markets, but he “supports them 100%”.

"Let's finally recognize that financial commerce is speech, and that it is speech worthy of all the protections that 'freedom of speech’ attracts,” said Slovakia-based Gogulski, who now runs an online bitcoin laundering service.

In spite of Ulbricht’s arrest and subsequent charges for drug-related crimes, dark market activity is growing. The technology to start such markets is readily available, and encryption makes it difficult for law enforcement to shut them down. Often, authorities must resort to infiltration and shoeleather detective work, which can be resource-intensive.

Jerry Brito, founder of cryptocurrency policy advisory service Coin Center, said that dark market operators nevertheless face their own challenges:

"I do think it’s very easy to start one, but then you have to get people to trust you to use that market, and I don’t think that’s easy at all. And I think it’s also difficult to keep the OPSEC [operational security] that you need to be completely impenetrable. So I am not sure I can say right now who’s winning. This is a big challenge for law enforcement."

Silk Road's alleged founder Ross Ulbricht was arrested after several OPSEC slip-ups that led law enforcement to his door.

The ITOM is currently in the middle of implementing the interventions that it planned in June. This phase will last until March 2015, after which the group will evaluate the results. There will be a concluding seminar on the project in September, and then a final report in December 2015.

Dark market image via Shutterstock.

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