Do Law Enforcement Busts of Darknet Markets Deter Criminal Activity in Other Darknet Markets?

32 Pages Posted: 4 Nov 2019 Last revised: 16 Jun 2020

See all articles by Prasad Vana

Prasad Vana

Tuck School of Business at Dartmouth

Pradeep Pachigolla

Dartmouth College - Tuck School of Business

Date Written: October 20, 2019

Abstract

A prominent way in which the sale of illegal goods such as drugs, weapons and counterfeit occurs online is through Darknet markets, which are platforms where buyers and vendors transact on the Dark Web. The Dark Web offers a high degree of anonymity and security to its users through its encryption technology and the use of cryptocurrency. Law enforcement agencies have responded to Darknet markets by conducting secret bust operations where they shut down the operation of these markets. In this research, we investigate if bust operations deter the activity of buyers and vendors in other Darknet markets that are not subject to the bust. We leverage a joint bust operation by the FBI and Interpol conducted in November 2014 where Silk Road 2.0, a large Darknet market was shut down. Our results indicate that following the bust, prices dropped and the number of transactions per month per vendor increased in two other large Darknet markets that were not bust. Consequently, the bust did not deter criminal activity in these markets and it was cheaper to buy illegal products. We explore the mechanism for the price drop and find that vendors decreased prices to attract buyers wary of shopping in Darknet markets due to increased risk of getting caught after the bust. We offer recommendations for law enforcement agencies on the sequencing of conducting busts as well as the characteristics of markets that could be bust so that the unintended consequences in other markets could be minimal.

Keywords: Digital commerce; Online marketplaces; Dark Web; Darknet markets; Policy

Suggested Citation

Vana, Prasad and Pachigolla, Pradeep, Do Law Enforcement Busts of Darknet Markets Deter Criminal Activity in Other Darknet Markets? (October 20, 2019). Tuck School of Business Working Paper No. 3474719, Available at SSRN: https://ssrn.com/abstract=3474719 or http://dx.doi.org/10.2139/ssrn.3474719

Prasad Vana (Contact Author)

Tuck School of Business at Dartmouth ( email )

Hanover, NH 03755
United States

HOME PAGE: http://www.prasadvana.com

Pradeep Pachigolla

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

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