A new report by Chainalysis suggests that the sanctions against Hydra last April and seizure of its servers near immediately thereafter resulted in an average loss of about $25,000 for 11 darknet markets that were regularly sending funds there, likely for laundering purposes. Chainalysis found that the closure of Hydra, the world’s biggest darknet market at the time, cost the 11 markets a total of nearly $271,000 in BTC, which amounts to just a tiny fraction of the $5 million or so Hydra was receiving on a daily basis.
In an analysis of the 10 entities sanctioned by the US Department of Treasury’s Office of Foreign Assets Control (OFAC) in 2022 – which in addition to Hydra includes the North Korea-associated Lazarus Group, individuals behind ransomware operations, drug traffickers, money laundering services, and even a paramilitary outfit – Chainalysis found that Hydra’s income dropped to near zero following the seizure of its servers, which was a direct result of sanctions placed on the market by OFAC.
A comparison of crypto inflows to three sanctioned entities before and after being sanctioned. Source: Chainalysis
Ethereum mixing service Tornado Cash, on the other hand, continues to receive lesser amounts of funds than prior to the sanctions placed against it, as even though its front-facing website was taken down, it continues to operate via decentralized smart contract on the Ethereum blockchain. Garantex, a Russia-based exchange that is immune from the effect of US sanctions, actually saw an uptick in activity after it was sanctioned, which Chainalysis believes is due to increased confidence that its operations would not be interrupted.
Chainalysis also found that Garantex processed more funds from darknet markets through the remainder of 2022, in the months following the sanctions against Hydra and itself, picking up activity from markets that were previously using Hydra to launder BTC proceeds.
Darknet markets appeared to suffer the lower end of losses in terms of categories of “illicit” depositors to sanctioned entities, with “cybercriminal administrators” losing close to $15 million and hackers losing slightly more than $1.8 million. The least affected category was that of “fraud shops,” which actually saw a net increase of $52,000 in revenue after the sanctions.