Here’s one initial coin offering (ICO) that’s almost certainly illegal, and not just under securities laws.

Hydra, reportedly the largest darknet marketplace serving Russia and neighboring countries, claims it is seeking to raise $146 million through a token sale to fund a worldwide expansion. The sale is scheduled to launch Dec. 16, according to an investment memorandum on the site, which is hard to access without a special anonymized browser. 

The tokens, priced at $100 each, will be available to purchase on the platform for bitcoin. A “package” of 100 tokens will provide a buyer with a 0.00333333 percent share of Hydra’s profit, the memorandum says. It makes no mention of which blockchain (if any) the tokens would run on.

Given the illicit nature of its business, Hydra’s token offering may be the most brazen ever, even compared to the ICOs that pushed the envelope of U.S. registration requirements in 2017. Russian news outlet Forklog warned that the sale could be an exit scam, a common occurrence in darknet markets.

The claims in Hydra’s offering memorandum are nothing if not bold. Boasting proficiency in security and attack resilience, the team behind Hydra says it wants to introduce the rest of the world to its “contact-free” method of trading contraband, in which the buyer, seller and courier never meet.

“It will start a new era in the West. The scale of expansion is hard to imagine,” the memorandum says. 

The ICO would fund the development of a new service dubbed Eternos, described as a worldwide darknet marketplace combined with an encrypted messenger, a crypto exchange, a Tor-like anonymous browser, AI-based dispute resolution and an over-the-counter (OTC) marketplace. 

“No KYC, everything will be anonymous and on the highest level. We’re no TON,” the announcement says, a dig at the Telegram messaging app’s blockchain project, which required buyers of its tokens to undergo know-your-customer screening. 

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Screen grabs of Hydra's ICO offering memorandum
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Screen grabs of Hydra's ICO offering memorandum

Hydra is planning to issue 1,470,000 tokens representing 49 percent of the new project and promising $500 monthly dividends in bitcoin for each token if the buyers get more than 100. 

That means Hydra operators are expecting Eternos to generate over $15 million monthly. “The estimate is based on Hydra’s growth metrics,” the announcement says. 

CoinDesk reached out to several moderators of Hydra listed on the website. No one responded by press time. One moderator marked the request as spam. 

'Millions' of users

Hydra opened in 2015, providing a marketplace for illegal goods such as drugs and their ingredients, counterfeit documents and money, and hacking services. According to the Russian investigative outlet The Project, Hydra’s user base exceeds 2.5 million accounts, 393,000 of which have made at least one purchase. 

According to Hydra itself, the number of users exceeds three million, and they make over 100,000 deals every day, trading Colombian cocaine, home-grown cannabis, fake passports, stolen official databases and cash in exchange for BTC. 

Purchases at Hydra are paid for in bitcoin or electronic money transfers, like at the oldest (and now defunct) illegal marketplace Silk Road, whose founder Ross Ulbricht is serving a life sentence in the U.S. However, unlike at Silk Road, Hydra buyers don’t get prohibited goods delivered by mail but rather hidden in secret locations around the cities where they live. 

After paying for the purchase, buyers get detailed directions to the right spot in a park, mailbox or another place where the “delivery” is waiting for them. The parcels are delivered by paid contractors, and none of the three participants in a transaction meet in person. 

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Screenshot of Hydra's product page

The Project estimated that since 2016, users have spent over $1 billion on Hydra. The website has its own team of developers, security service and drug counselors, according to an anonymous staffer who talked to The Project. 

According to its jobs page, Hydra is hiring its own chemists to check the quality of the drugs sold on the marketplace. 

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