A More Targeted Approach to Policing Darknet Deals

The arrest of the “Xanax King” in 2014 made national news. 

For months, Jeremy Donagal, the drug dealer behind the darknet moniker, had been selling counterfeit Xanax pills and other drugs on SilkRoad 2, one of the most popular darknet websites. His case led to the arrest of close to 60 other individuals throughout the United States in one of the largest busts of darknet drug dealing.

But that type of law enforcement effort—targeting major market participants—broke from the traditional approach to stopping this crime, which targeted the administrators of these illegal sites. 

Carlson School Associate Professor Jason Chan explains that the targeted arrest of major darknet drug vendors is more resource efficient, as shutting down a site involves policing agencies from different countries, making it costly both in time and money.

In a new paper "Shedding Light on the Dark: The Impact of Legal Enforcement on Darknet Transactions" published in Information Systems Research, Professor Chan along with three co-authors, compared the effectiveness of these approaches. The answer was clear.

“We found that the arrests of darknet participants put a downward pressure on transaction volume and weekly participation levels on the affected sites,” Chan says. “These results suggest that selective targeting enforcement could be effective in dampening market participation.”

Donagal’s arrest was made public in June 2014. A review of transaction data from April to October 2014 shows:

• The arrest leads to a 39.2 percent decrease in the number of transactions for U.S.-based vendors, on average.
• A decrease in the number of reviews on the site by 70.5 percent relative to control sites.
• Smaller vendors on the site were more likely to pull out of the market than larger vendors.
• Vendors selling dangerous drugs reduced their drug-selling activities much more than those selling less dangerous drugs.
• Drug sellers in other countries were also deterred.

Globally, transactions on darknet markets have been growing steadily over the last few years. The average daily transactions on darknet markets involve at least $2 million worth of goods and services. The majority of sales involve drug trading, which is estimated to account for two-thirds of all transactions in this market.

“The unabated expansion of the darknet drug market is concerning from a public health perspective,” Chan says. “As an underground economy that is not governed by a regulatory system, darknet markets allow for the transactions of impure and specialized designer drugs that can cause dangerous and unpredictable side effects.”