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It's open, honest, and filled with life lessons. Visit ps-pg.com to learn more and buy the book. Hello everybody, this is Marshall Pillow. I'm the editor of the New Books Network. And I'd like to tell you that we have a new and improved website. It has two new features that we think you'll love. One of them is a vastly improved search engine so that when you type in keywords, you'll get a bunch of episodes really quick. The other is the ability to create a listener account. And in that listener account, you can save episodes for later listening so you can create a kind of listening list. We think these features are neat and we think you'll enjoy them. Please visit the site today. Okay, welcome to another episode of New Books and Terrorism and Organized Crime. And this time I'm actually trying a new technique where I'm going to interview somebody live and we're at the Australian New Zealand Society of Criminology Conference at the University of Sydney. And today I am very happy to have James Martin. We're going to talk about his new book Drugs on the Dark Net, how crypto markets are transforming the global trade in illicit drugs. So James, thank you very much for participating in the interview. Thank you. Cheers. Thank you for having me. No problem. So we'll start off as I said with our normal question. Tell us about yourself and what your background is and how you come to be interested in this topic and write this book. Sure. Well, yeah, as you said, I'm Dr. James Martin. I'm Director of Research at the Department of Police and Intelligence and Counterterrorism at Macquarie University. I also convene the criminology program there. And I guess I fell into researching this by accident. It wasn't traditionally my field, the sort of online crime space. My PhD research was on South Africa and vigilante games, which I guess is quite a different area. Although there were some theoretical similarities between this research and that earlier research as well. But it was mainly through hearing about Silk Road through the media. And I knew some people that had used the site for various purposes. And when as an academic, when you hear about something that sounds astounding, everyone's every academic's first impulse is to care what's been written, what's been done about it yet. And I realised at the time, and still to an extent to the present, there's remarkably little researchers being done in this area. So I sensed it was a bit of a vacant space and a bit of unmapped territory. So I thought to go and match myself. Take the opportunity when it arises. Yeah, absolutely. I think it's a fascinating area. I've only ever seen one other presentation at a conference about it. And that was two years ago at the American Society of Criminology. So I think I was telling you yesterday. And that one even was purely descriptive. Hey, there's a thing called Silk Road. And this is what it does. Now, since then Silk Road's been closed down. Do you want to give us a bit of a background to even what is Silk Road, how it worked and the infamous character behind it and how it was closed down? Sure. Well, Silk Road was, I guess, the best known crypto market. It wasn't the first one. There are a few sort of forerunners to it. But it was definitely the best, the most well known. And it really popularized it. It brought its online darknet drug trade in particular into the public spotlight. It was, it looks, like I should say, allegedly, the guy behind it, Russell Britt, the Dread Pirate Roberts. He had this idea basically as soon as the tour network, which is the darknet. It's an encrypted part of the internet. That had been running since about 2003. That was set up with the help of US Naval Intelligence. A few public private organizations. It ostensibly allows people to communicate online, but have their identity and their location scrambled. So that's part of the communications technology. According to Dread Pirate Roberts, in his 10-page magazine interview he did before, it's about three months before he's arrest. He said basically that was the first part. The second part was Bitcoin and the development of cryptocurrency. So as soon as those things were together, it allowed transactions to take place between people online without any real, certainly any feasible way for law enforcement or other authorities to track what was going on. So that would be the really two key ingredients. Dread Pirate Roberts, in his interview said, "As soon as those two things came together, it was just a matter of time before something like Silk Road was developed." Because really, the tour network is not illegal. Participating it is not illegal. Bitcoins aren't illegal. So they're taking two legitimate tools and creating an illicit market place out of those two tools. Absolutely, and accessing crypto markets isn't illegal either. It's not illegal to look at these sites. But certainly once you're buying, selling illicit products, then you can cross very quickly into the boundaries of trivial reality. So it's an interesting point now, where are you buying it? So if I went onto a place like Silk Road and I bought crack cocaine, is there a legal question about where I've actually carried out the purchase or is it about the fact that I'm importing it, say, into Australia, that that's the criminal offense? What do they charge you with? Yeah, that's a really good question. And I think it's a conundrum for the lawyers and it's a conundrum for the law enforcement, is what you can actually be charged with. If you have purchased, say, crack cocaine, the only way the police would know about it is really if they intercepted it in customs. And then they've just got a name and an address. And not necessarily anything else that ties you to the offense, unless they've set up some sort of electronic surveillance, or they surveil you after the delivery of the package. So, you know, because you're opening it and enjoying it or whatever, and, you know, can tell that it's intended for you. But short of those things will be very difficult to charge you with anything, other than possession. That's right. And even then demonstrating he caught beyond a reasonable doubt that you knew that you were a possession of this substance, if it had just been delivered to your house, is problematic. And it's very problematic, yeah. So let's take a step back and let's just talk about crypto markets in general. And one of the sort of things that people are selling in these illicit market places, it's not just drugs. No, drugs don't seem to be the biggest single category, if you like, with a list of products out there. But there are books, for example, you've got your terrorist handbook, those sorts of things that you wouldn't be able to get through any legitimate means. People sell stolen credit card information. That's a big growing aspect of the crypto market trade. One of the biggest concerns would be over things like child exploitation material, but the mainstream crypto market. So Silk Road to Agora, which is the biggest one we think now at Pandora, all have strict prohibitions on anything to do with child exploitation material. So there definitely is a dark net trade and that kind of stuff, but it's very strictly segregated from this kind of more mainstream types of illicit products. Right. It's a very interesting marketplace now, as you were pointing out yesterday in your presentation. When Silk Road went under because of the arrest of the dread part Roberts, it didn't actually close down the market because there was a floor in the whole scheme that allowed new markets to pop up everywhere. Do you want to discuss that? Sure. Well, Silk Road, as I mentioned, was never, wasn't the first, and wasn't the only one operating at the time. There were other crypto markets that were operating concurrently with Silk Road. The Silk Road was undoubtedly the biggest and it absorbed, it was the dominant market player that absorbed all of the or the dominant market share. So when Silk Road shut down, law enforcement were quite quick at times, called this at the beginning and the end of the online drive straight. And that was really premature. What we've actually seen is the closure of Silk Road was actually an act of creative destruction and freed up the marketplace and allowed new, more innovative crypto markets either to expand or to develop new entire entirely new crypto markets. So what are these markets like? They look so much like an eBay style with all the same customer references and advertising as well. Yeah, that's right. They're really striking. First time, I think I think everyone sort of had their mind blown a bit. First time they actually jump on the dark now and have a look at the sites look like, because on the one hand, they look quite mundane and prosaic. You've got different product categories, you've got complaint procedures, you've got customer support lines, and on the bigger sites, these will be 24 hours a day, multi-lingual customer support. And there's a lot of corporate, slogan earring and marketing rhetoric. We have an open to customers about providing the top levels of service, et cetera, et cetera. And a lot of the complaints that go through, they're about minor delays of chipping time and quite mundane, prosaic kind of things you wouldn't necessarily associate with. The drama and violence of the conventional illicit drug straight. But then when you look at the products, they're incredibly striking. Because it's literally any, well, certainly any drug you can take off, and a lot you've probably never heard of as well. Yeah. Well, anyone who's used eBay would be familiar with the customer feedback system, and that same system applies on most of these markets. Yeah, and I'd actually say this is probably more important on crypto markets than it is, even on something like eBay. Because on eBay, even if you do get ripped off, there are legitimate recourse mechanisms. You can take someone to quad. I mean, it's difficult if you're buying from someone in another country. You can trace financial payments. There are legitimate recourse mechanisms. But on crypto markets, it's one of the really distinctive characteristics of these sites. Is once you conduct a transaction, once you send someone to bitcoins, there's absolutely no way of getting them back. You don't know who that person is, where they are, and they can have it gone with your funds with no recourse. So obviously, you can't go to the police. And even if you did go to the police, you would definitely tell them anything about where you got it. So customer feedback is absolutely critical, because it provides consumers with a relatively objective source of information about the reliability of the goods. And the crucial thing about customer feedback is crypto markets like eBay. The administrators of the site don't actually sell anything themselves. They host the site infrastructure and they take a commission on all sales that are conducted through the sites. And they're the ones that control the customer feedback. So anybody that buys something from an online dealer hosts feedback. And even if it's bad feedback, the dealer can't remove that negative feedback from their seller page. So it makes online dealers exceptionally sensitive to their customers' preferences and to their customers' expectations and feedback. I also don't know if you had the guarantees of delivery. I mean, we're shifting illegal goods across national borders, but there are some levels of guarantee about when it'll arrive, if it'll arrive, replacement value, which is utterly bizarre for the type of market we're talking about. Yeah, it is. It's really strange. The top ranked dealers serve the ones with the highest levels of customer feedback, and who attract the most business as a result of that sort of stellar online reputation. Sometimes have pages and pages of terms and conditions. And it's all about managing customer expectations to try and avoid that negative customer feedback. So as an online dealer, the last thing you want is someone saying buying drugs from Europe to Australia and then complaining about it not arriving in five days. So they're very specific and saying, "Okay, well, if you're buying from Australia, you need to be prepared to wait 10 days or 15 days or whatever it is." Also, one of the things that I think you would never see in conventional street dealing are refunds. And with the top dealers, again, there'll be different levels of refunds depending on where you're buying goods. So buying goods into Australia, for example, usually lower levels of refunds because we have quite a rigorous customs inspection regime and we're known to have more deliveries intercepted still obviously enough that it's profitable for dealers to try. And we've obviously got records of success if they're doing it on these sites. But... What about the way they're sending this? So they're getting things successfully through customs in Australia. And Australia is, as you said, a very strict customs regime. We scan everything that comes to the post and I'm assuming the post is the place that these things are usually moving, especially if they're moving in 10 days. So what are they actually doing to get these things through? Yeah, well, this is the really clever, I guess, is... I mean, drugs have been sent through the post for a long time. So as long as there's been post, people have been sending things that are contraband and particularly drugs from place to place. What's different about what's happening now is back in the pre-crypto market era or even the pre-internet era, if you wanted to send drugs in the post, you really had to figure out how to do it by yourself. And you're accepting all of the risk yourself in trying to figure out how to do that. You're the one who coughs the loss of funds. If it's intercepted, you're the one that gets arrested and goes to jail if you stuff it up. What's happening now is that the top-ranked dealers are starting to actually provide information to the rest of the crypto market community about how to conceal drugs effectively and defeat the different introduction tools that are out there. So if anyone logged on to any of these crypto markets, there are pages and pages of discussion forums from people with demonstrated records of success about how to get things through customs. So they've used things like moisture barrier bags, which sniffer dogs can't smell through, double bleaching, making sure you're wearing multiple pairs of gloves. So fingerprints don't get left on anything inside, properly waiting packages. All of these things that we know are potential red flags to have an item post inspected. And the reason we know the red flags is because we've actually had the risk matrixes lead onto a number of these sites, as well as documentation from the FBI, the DEA, Australia Post, UPS. And even more incredibly, we've had ask me anything, AMA sessions with postal employees in America, certainly, about what exactly they looked for, what would attract suspicion. So there's a lot of knowledge now, there's a huge body of knowledge now that didn't exist before. So this is a very unique, internet thing? Yes, they couldn't have happened before in the same way as it's happening. Absolutely not. And what it's what we're seeing is long-term strategic knowledge advantage that law enforcement used to have that customers used to have because customs agencies around the world would talk to each other, certainly national police forces would talk to each other, talk to postal companies and develop intelligence, develop these risk matrices so that they could have highly effective, efficient ways of targeting high-risk items opposed. Now we're seeing that dealers are developing their own counter-interdiction body of intelligence, their own knowledge about how to defeat these systems. So that knowledge advantage that law enforcement had is steadily being eroded now. Wow, yeah, it made a great comment yesterday that a lot of people, when they're buying products, are warned to not throw out their junk mail because that may be the mechanism they're using to get the drugs to them, that it's so well disguised, it just looks like normal junk mail. Yeah, there's some obvious reasons dealers are reluctant to specify and they make specific on their sites, not for people to review how it was concealed in customer feedback, that sort of thing. But yeah, the comments on their sites don't throw out your junk mail because they've had customers have complaints, give them negative feedback because they've said, "Oh, my stuff hasn't arrived." And this is how well it's concealed, even people who are waiting for it, expecting for it, going through their mail, looking to see it, don't actually even know when it's arrived. So very sophisticated concealment techniques that so far with the top dealers, they're confident in defeating any customs ration. Wow, and this is very much a retail market or is there a wholesale component to it as well? It looks as though there's a mixture of the two. There's been some research done recently that indicates as much as 40% of the crypto market marketplace could be wholesaler, so dealers buying online and then using that to sell on. There is contention around that, it's difficult to define exactly how much is personal use, personal use for various person in person. But I'd say the bulk of what we can see at least on these sites being traded is for retail personal customer use. Yeah, and it seems to be the place that you'd be attracted to if you were trying to buy. It wouldn't be a safer option because, well, I don't know, has there ever been any police undercover work being conducted where they've pretended to be a seller? I don't know, actually, I don't know about pretending to be a seller. Certainly they have admitted, including the FBI and the AFP, Australian Federal Police, to posing as online buyers to try and gather information. But posing as a seller would be potentially problematic because you could be accused of entrapment, but also I imagine that the police don't necessarily want to target the end users. And if it's predominantly a retail market, that's what you're going to get. Yeah, it'd be very hard to investigate. I don't know what you could do is you were saying they couldn't close down the technology. The technology was sound. How did they actually capture Dread Pirate Roberts in the first place? What techniques did they use? It was a multi-pronged investigation. So there were people working on the cyber element, basically going through digital footprints. And they figured out who he was. There was a comment that Dread Pirate Roberts had made sprucing Silk Road right when it was begun. And that's one of the weaknesses, was one of the weaknesses back when Silk Road was operating, was how do you popularize something that's hidden in the darkness? So if you could trace back and find the first mentions, well, obviously it would have to be someone who knew something about how the site was running. So basically, the FBI was looking back in time to try and find those original comments. And then they found, it was linked to his real name and his real address. So they were getting an idea of who he was. Concurrently, there was an undercover investigation. It looks as though Dread Pirate Roberts refused to buy some bulk drugs that an undercover agent wanted to sell him, but he referred them to one of his moderators. The moderator was compromised by this FBI sting, and then the moderator was compelled to blackmail Dread Pirate Roberts. And eventually Dread Pirate Roberts called in, it looks as though all of this is allegedly, I should say, is alleged to have called in a hit from some undercover FBI agents who were trying to advertise hitman services on Silk Road. But again, interestingly, this is, this information has come out, but the FBI haven't charged him with attempt to murder, because they were posing as the hitman. So it's potentially a traffic as well. That brings me back to something I forgot to ask you about earlier. We were talking about the marketplace. This ethical customer service isn't the end of the ethics of the people who are running, these very libertarian people running their drug sales. They also often have limits on what they were allowed to be sold on their sites. Yeah, absolutely. It's not a value-free zone. You know, there was, there was an interesting newspaper article that described it as a "mosaicily spaceport", you know, the place where the wretched hive of scum and villainy where you can do anything for sale. And that's really, that's a colourful, but it's a really inaccurate description of these sites. They're not value-free zones. There are often quite explicit rules about what can and can't be sold. Usually, what you will see is nothing involved in the harming of other people. So you will see, you know, strict prohibitions, for example, on child exploitation material. But then you will see some sites sell weaponry, for example, firearms, tases, that sort of thing. Whereas other sites will say strictly only deal in marijuana, for example. So there's different niche markets and different clientele and different products on each site. Nick may actually reflect where they were coming from. So I can imagine that Europeans or Australians, for example, would be far less likely to sell firearms, whereas someone from the United States may have less of a concern about firearms, given the different cultural responses to firearms in that country. That's true. But there would be more of an incentive to try and acquire black market firearms here, because there's respect and control. So yeah, but at the same time, firearms, one of the tricky things about firearms is, while it's quite easy compared with drugs, it's quite easy to smuggle a gram or two cocaine or a ten-pack of pills in a normal business envelope. It's much harder to do that with firearms. So trying to get something into Australia like that, I imagine it would be very problematic. So what do you think police can actually do to try and deal with this area? I mean, obviously, that's classic policing methods, undercover policing methods you've been discussing before that brought down Silk Road. Is that going to always be effective? Or is there some other whiz bang techo solution there? Yeah, I think undercover will become less and less effective. I think people have realised now, particularly with it being public knowledge, how Japar Roberts was taken down. Well, part of his takedown was through this undercover operation. We'll just make people more and more protective online and make sure that they're not exposed to that kind of investigation. So I think it was a bit of a one true pony. I don't think that law enforcement would be able to rely on that strategy again in the future. The technology side is the great unknown, really. It's developing both sides. It's an arm race and arms race. So law enforcement, which traditionally don't have particularly strong cyber capacities working to develop in this area, but it's incredibly resource intensive. And it's also difficult to justify, I imagine, budget-wise, in the end, law enforcement won't bang for their buck. They want the table packed with the kilos of cocaine and the guns and preferably some tattooed Mexicans or bikers, symbols of threat that they can say. We're taking this off the street. Whereas this is quite difficult to get those same levels of news value, newsworthy arrests out of sites like this. And because it drives unobtrusively in the mail, crypto markets aren't associated with the associated with violence. So there's not the same level of public concern about them. And we would have to guess, or there's been a little work done on this, that a lot of the customers using these sites would be relatively middle class people with computers, bank accounts, and off education to be able to operate these systems. So again, not the kind of drug users necessarily that are as concerned to the general public item. So what's the future for all of this? Yeah, that's a good question. As long as the tech halter, I guess that's the real thing here. If there's some magical breakthrough solution to all of this encryption, then it could all go away overnight. I doubt that that will happen and the people investing in these sites clearly doubt it will happen as well. So it looks to be at the moment that we're coming into a new stage of decentralization where new crypto markets are opening up all the time, each trying to offer more competitive and better deals than the last, but also trying to establish themselves as reputable trusted rags. And that's one of the interesting things we're seeing on the online space. We're seeing this gentrification of the drug market where more and more, because these sites and the vendors operate online, they don't need to maintain this violent deterrence, this sort of hard-man persona. They're free to create this more sensitive retail style that's tuned, closely tuned to their customers' preferences and customers' needs. It'll be really interesting when this gradual reduction of criminalization of marijuana in various places around the world, and they're talking in Australia at the moment about bringing in a bill for legalizing medical marijuana, whether you'll see any of the sellers who have a great brand, move themselves to the legitimate online market with this reliable serviced brand. Yeah, that would be fascinating. Yeah, that would be interesting to see if anyone made that transition. And it would be interesting to see, yeah, I don't think anyone's done this research, what's happened in Colorado, what's happened in other places that have decriminalized, or legalized, completely legalized marijuana. In the end, that's the only thing that's really going to take drugs off the dark and short of some miracle in breaking through the encryption. Yeah, yeah, absolutely fascinating. So what's the next thing you're going to work on? Oh, I think I'm going to stay in the online drugs area for a while. I think it could keep going for a very long time. Yeah, it's still a really unmapped space. I think there's some good ethnographic work to be done. These are real, they're not just sites for the Commission of Cybercrime, they're also very cohesive communities. Community is one of the words that's thrown around a lot on these sites. There's a real sense of strong collective identity and subcultural values that vary between science sites. I'd like to explore that. I'd also really like to get into looking at how online drug markets are affecting offline drug markets, whether it's contributing to a identification of the drugs trade offline, as well as dealers more and more don't necessarily need to source their drugs from the traditional sources so they can source them online and smart. So people can very much like free trade coffee say, well, I'm going to buy meth, but I'm going to buy it from nice people. Well, this, yeah, I'm not going to buy it from bike. It is I'm going to do it. Our people online then going to be able to say, hey, we didn't make this in the back of a van or, you know, in a toilet bowl. This is a high quality product. Yeah, they're already doing that. That's one of the really funny things about this trade is we're starting to see claims to ethical sourcing, fair trade, cocaine. These kinds of things where, or by buying this opium, you're supporting peasant farmers and not organised prime groups. Very difficult to authenticate these claims, but yeah, again, it shows to the kind of customer base the fact that, you know, these are not necessarily your stereotypical drug user, your average drug user is not your stereotypical drug user anyway. But, you know, if people want to buy fair trade coffee fair trade, fair trade chocolate, why not fair trade cocaine as well? Absolutely. Okay. Well, thank you very much, James Martin. We've been discussing your book drugs on the dark net. And this is a Palgrave pivot book, which I highly recommend Palgrave pivot. I actually published with them as well. So if anyone wants a good read and they turn around very quickly these books, I would recommend that you go and definitely read this one. This will give you a very unique view on the way that drug markets can work. So thank you again. Thanks, Mike. Okay. [MUSIC] [BLANK_AUDIO]
I am old enough to realise that we have entered a science fiction world in which the old systems of the market place are being sidestepped by new technology. We who follow the tried and true methods are missing out of the brave new world. The changes are particularly true for the middle men whose services are no longer needed as the web allows customers to deal directly with producers. This also applies to the participants in organised crime. James Martin‘s terrific new book Drugs on the Dark Net: How Cryptomarkets are Transforming the Global Trade in Illicit Drugs (Palgrave, 2014)spells out how this is occurring in the drug trade as the Tor Network allows drug users to purchase their products from anywhere in the world. No longer are they tied to a street dealer or a friend for supply. No longer do they lack choice in quality or variety. Now they can peruse a range of products from the safety of their home. They have choice that would never be available without the internet. More importantly, as Martin points out, they are now valued customers with contracts, refund policies and providers of feedback on service quality. These websites provide all types of illicit goods but, surprisingly, many have ethical frameworks that limit their product ranges to restrict the sale of unacceptable goods and services such as child pornography or, in comes cases, firearms. This book is a mind expanding (pun intended) exploration of a high tech illicit market place that is essential reading for police, academics and the public at large.
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