‍Two Charged With Operating $430 Million Darknet Market Empire In Investigation Led By HSI New York

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‍Two Charged With Operating $430 Million Darknet Market Empire In Investigation Led By HSI New York

Last week, two men, both in custody, were charged in federal court in Chicago with operating “Empire Market,” a dark web marketplace that enabled users to buy and sell more than $430 million in illegal goods and services around the world.

The investigation was a joint effort by Homeland Security Investigations-New York, FBI Chicago, and USPIS Chicago.

According to a newly filed superseding indictment, Thomas Pavey and Raheim Hamilton, owned and operated Empire Market from 2018 to 2020, during which time they facilitated approximately four million transactions between vendors and buyers valued at more than $430 million. The indictment charges Pavey and Hamilton with conspiring to engage in drug trafficking, computer fraud, access device fraud, counterfeiting, and money laundering.

According to the charges, Pavey and Hamilton previously worked together to advertise and sell counterfeit U.S. currency on AlphaBay, a dark web marketplace for illicit goods that was shut down in 2017.  After the demise of AlphaBay, the two began operating Empire Market in 2018. 

Vendors on Empire Market, according to the indictment, offered to sell various illicit goods and services, including controlled substances such as heroin, methamphetamine, cocaine, and LSD, as well as counterfeit currency and stolen credit card information, the indictment states. Buyers could browse the available goods and services by category, including “Fraud,” “Drugs & Chemicals,” “Counterfeit Items,” and “Software & Malware.” After transactions were completed using cryptocurrency, buyers could review and rate their purchases on multiple criteria, including “stealth.”

As shown in TRM's graph visualizer, Empire Market was a large exchange with incoming exposure from many western-based VASPS and outgoing exposure to mixers, peer-to-peer marketplaces and other unhosted addresses.

During the investigation, law enforcement seized cryptocurrency valued at $75 million at the time of the seizures, as well as cash and precious metals.

According to analysis by TRM Labs’ blockchain intelligence team focused on darknet market ecosystems, Empire Market was one of the largest Western darknet markets in operation during the relevant period. Following the AlphaBay/Hansa Market takedowns in 2017 the Western darknet market ecosystem was in disarray, with darknet markets users confounded by the concept that law enforcement could takeover and covertly run darknet market infrastructure – law enforcement ran Hansa Market for approximately a month without any indication to users. During this period deposits to darknet markets dropped significantly and no new leader emerged as vendors and buyers tended to avoid darknet markers while the dust settled.

In stepped Empire Market which appeared in February 2018 (about 6-7 months after the demise of AlphaBay/Hansa) and soon became the leader of the Western darknet market ecosystem. The fact that its graphical user interface was built to resemble that of AlphaBay was purposely done to instill a sense of familiarity for users who had become accustomed to AlphaBay.

Users trumpeted Empire as a “solid' platform” with a great developer team. The darknet market was a classic escrow marketplace (i.e. users deposited funds into Empire and, only then, were able to make purchases). Empire quickly attracted new vendors and buyers and its reliability and features, coupled with low vendor bonds – that is, the cost of signing up as a vendor – a responsive moderator team, and the familiarity of the interface, turned it into a leader. At first Empire allowed weapons listings, but soon afterwards these were banned.

In August 2020 Empire suddenly exit-scammed with the darknet markets disappearance.

This case was, in part, investigated by HSI New York’s El Dorado Task Force, a money laundering task force comprised of more than 200 law enforcement personnel representing approximately 35 federal, state and local law enforcement and regulatory agencies. The EDTF encompasses a standalone Cyber Division and is on a mission to disrupt, dismantle or render ineffective organizations involved in the laundering of proceeds of narcotics trafficking and other financial crimes. Since its inception in 1992, the task force has been responsible for the seizure of approximately $600 million and more than 2100 arrests.

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