Exposed: The dark side of the internet, where you can buy drugs, sex and indecent images

In a hidden corner of the web, the Silk Road site quietly earns millions as an illegal-drug marketplace – a kind of ‘amoral eBay’. But start-up Atlantis wants a share, and it’s pulling in business fast with ads on YouTube. Paul Peachey reports on a cybercrime turf war

It has all the hallmarks of a drugs turf war. The don is under threat, wounded by a series of attacks, with key players swapping sides and prices undercut by a hungry young rival. He lashes back: the newcomer “gets no respect from me” and the dealers watch carefully for shifts in power.

This, however, is not a battle fought with weapons on street corners. The fight is for ownership of one of the darkest corners of the internet, where high-grade drugs at street-level prices are available at the click of the button.

After more than two years of undisputed leadership, Silk Road – the one-stop shop for drugs, porn and dodgy documents described as an “amoral eBay” – is facing a challenge from a rival hungry for a slice of its multimillion-pound revenues. Established in 2011 by a shadowy founder known as Dread Pirate Roberts, Silk Road has been a business success story. It has provided anonymity to its users and sellers on a sub-layer of the internet unreachable by normal search engines such as Google.

Now a new start-up, Atlantis, has copied many of its features but changed the rules with an unexpectedly public promotional campaign and financial incentives to dealers to switch to its marketplace.

Founded by libertarian activists with backgrounds in business, technology and drug dealing, Atlantis stepped up its offering last month with a YouTube advertising campaign and a question and answer session with its anonymous chief executive officer. The advert – featuring an animated figure called Charlie the stoner – led to rapid growth with 500 sign-ups a day and 50,000 registered users, according to a senior figure at Atlantis, “Heisenberg2.0”, in response to a series of questions from The Independent on Sunday. Among its selling points: next-day delivery, no hidden fees and an “eBay-style feedback system”.

“If we continue growing at the pace we are now we will be bigger than Silk Road this time next year, but we are playing the long game and know a lot will change in the world around us between now and then,” said Heisenberg2.0. “Maybe when the world’s leaders are ready to give up the prohibition game we will be ready to come out of the shadows and help clean up the mess they made. In the meantime we are quite happy to operate outside of the current legal frameworks that exist.”

The site is set up like a typical online marketplace offering forgeries, porn, memorabilia, sports shirts and a deal to “buy” Twitter followers for the online narcissist. Items banned from sale include “anything related to paedophilia, poisons, loans, investment opportunities, assassination services or anything which can inflict harm on another person”.

But its staple is drugs. Though the sums represent a tiny fraction of the multibillion-pound global market, the sites represent an emerging threat to law enforcement and an end to the reliance on street-corner deals. High-grade cocaine with purity claimed at more than 80 per cent is sold at £65 a gramme, and shipped from Belgium. Average street price in the UK is £46 a gramme, according to the charity DrugScope, but for inferior purity.

“If people can become aware of being able to source cocaine of that purity ... then we will see a change,” said Allen Morgan, an expert witness and former police officer. “There’s definitely a market for high-grade cocaine among professionals, and people are fed up of getting ripped off with low-quality cocaine. I think we will see a seismic shift in the UK drugs market and it will take the police a long time to get a grip on this.”

Atlantis is just the latest example of anonymous online markets – offering illegal merchandise or services – which are beginning to prosper and proliferate. Only The Armory – which sold weapons – was scrapped, because of low sales. Operators use the cloaking anonymity of the Tor network – known as the hidden web – created by the US military and designed to hide the identity of users and sellers.

Nicolas Christin, of Carnegie Mellon University, who has studied Silk Road, says the proof of its success is the emergence of competition. “You don’t have to interact with shady characters, you just click on a few buttons and you get what you want in the mail,” he said. “Silk Road was always under the radar. Atlantis is very aggressively marketing itself. It’s a very different approach.”

Deals on Atlantis are done via encrypted software and paid for with cybercurrency, an internet cash equivalent. Sellers are encouraged to “creatively disguise” shipments as business mail, and vacuum-pack them to avoid sniffer-dog detection.

The identity of those behind Atlantis is a mystery, and Heisenberg2.0 declined to reveal even the nationality of its founders. The Serious Organised Crime Agency said it was “aware of the so-called ‘hidden’ areas of the internet, and has the capability to investigate organised criminal groups seeking to exploit them”.

Police have successfully targeted sellers on such sites. In April 2012, US authorities busted a secret drugs marketplace known as the Farmer’s Market, resulting in eight arrests in the US, the Netherlands and Colombia. Officials said the ring handled over $1m (£655,000) in drugs sales from 2007 to 2009. It had customers in every US state, and in 34 countries, according to court documents.

Peter Wood, the founder of the ethical hacking firm First Base Technologies, said breaking open the networks depended on identifying individuals, then seizing their computer equipment. “It’s a case of tricking the person into engaging with them to get access to a computer,” he said. “It’s the same sort of techniques as traditional police work, and conning the conmen.”

Global crime goes online

Organised gangs are increasingly switching from traditional crimes to cyber scams to tap lucrative new opportunities through the relative anonymity of the web, statistics showed this week – with a sharp rise in online crimes recorded in England and Wales.

The cracking of criminal rings involved in child sex abuse, fake credit cards and online drug sales have led to gangs going deeper into the so-called Darknet to avoid the law. The Child Exploitation and Online Protection Centre this month revealed its concern over the growing use of anonymous online encrypted networks, with use in Britain increasing by two-thirds, one of the largest increases globally.

Europol warns that new technologies adopted by criminals mean that previous investigative methods “will prove ineffective”.

Deputy Chief Constable Jeff Farrar, of the Association of Chief Police Officers, said: “Crime is moving to the online world.”

The advantages for criminals are clear: the web allows greater penetration of global markets without the risk of border security, and profit potential is huge through the activities of small numbers of criminals. The 27 per cent rise in frauds last year was accompanied by falls in most other crimes.

The benefits were highlighted by the tiny operation that ran a “Facebook for fraudsters” from an internet café but acted as a supermarket for a global network of cyber criminals that led to losses of tens of millions of pounds. A Sri Lankan-born Briton, Renukanth Subramaniam, was jailed for nearly five years for orchestrating the Darkmarket site, where 2,000 fraudsters traded credit cards and viruses. Prosecutors said that the scam utilised modern technology with “no more than a dishonest will, a laptop, a mouse and internet access” to commit theft on an unprecedented scale.

But Darkmarket is dwarfed by what US authorities claim is a £4bn money-laundering project by a firm that hid proceeds of crimes such as theft, drug trafficking and child porn. Liberty Reserve was the front for 55 million illegal transactions, according to an indictment lodged in the US courts after its founder was arrested in Spain in May.

The Serious Organised Crime Agency said it had sent “cyber liaison officers” to key locations abroad to work with other agencies.