How online black markets work
Corporate investigator Brandon Gregg looks at how bitcoins and Tor make anonymous black markets tick
By Brandon Gregg , CPP
April 30, 2012 — CSO —
The internet is no stranger to crime. From counterfeit and stolen products, to illegal drugs, stolen identities and weapons, nearly anything can be purchased online with a few clicks of the mouse. The online black market not only can be accessed by anyone with an Internet connection, but the whole process of ordering illicit goods and services is alarmingly easy and anonymous, with multiple marketplaces to buy or sell anything you want.
Understanding how the market thrives—unregulated and untraceable—can give you a better sense of the threats (or resources) that affect you and your business.
In our scenario we are going to legally transfer $1,000 USD out of a regular bank account and into a mathematical system of binary codes, and then enter a neighborhood of the Internet largely used by criminals. This hidden world anyone lets purchase bulk downloads of stolen credit cards, as well as a credit card writer, blank cards, some "on stage" fake identities—and maybe even a grenade launcher they've had their eyes on.
A journey into the darker side of the Internet starts with two open-source programs: Bitcoin and the Tor Bundle.
Moving MoneyBitcoin (www.bitcoin.org) is system tool that will act as a personal bank for storing and investing digital currency on your computer. Once it's installed on your system, it sits empty like a piggy bank, waiting to be filled with untraceable digital cash.
Getting it filled is the tricky part.
The digital monetary system online is predominately operated by the likes of Paypal, Western Union, and banking companies that try to follow government regulations to prevent fraud and money laundering. There are two steps to legally take money and have it converted at the current Bitcoin rate into BTCs in our digital and anonymous bank.
Start by opening a Dwolla (www.dwolla.com) banking account with no fees. You can use your real information—you aren't doing anything illegal. In about three days you will be given a fraud test and have to identify small transfers in your Dwolla and personal bank account. Once your account is confirmed, wire any amount from your personal bank to Dwolla from a lump sum or the estimated price of your purchase you have in mind. After you confirm the transfers, your legit money will now be stored in a new global bank with less restriction than US banks.
Next you need to set up an account with the largest bitcoin exchanger, MtGox. Due to fraud concerns, MtGox will only allow transfers from banks like Dwolla.
After your Dwolla transfer moves to MtGox, you can use the money to purchase Bitcoins on the open market for a small percentage-based fee. Once this sale is complete, your bitcoins are best stored in your own bank account that is residing digitally on your computer.
The whole process can be completed in less than a week, and the $1,000 USD is now exchanged to $191 BTC. Now you are ready to go shopping on the black market.