Crypto investors spent $4.6B buying ‘pump and dump’ tokens last year

February 17, 2023 Coin Telegraph

<div>Crypto investors spent .6B buying 'pump and dump' tokens last year</div>

chainalysis

Nearly 10,000 tokens launched on BNB and Ethereum last year are suspected to have been created just to dump on investors, according to Chainalysis.

Cryptocurrency investors funneled as much as $4.6 billion into crypto tokens suspected to be part of “pump and dump” schemes in 2022.

A Feb. 16 report from blockchain analytics firm Chainalysis “analyzed all tokens launched” in 2022 on the BNB and Ethereum blockchains and found just over 9,900 bore characteristics of a "pump and dump" scheme.

A pump-and-dump scheme typically involves the creators orchestrating a campaign of misleading statements, hype, and Fear Of Missing Out (FOMO) to persuade investors into purchasing tokens while secretly selling their stake in the scheme at inflated prices.

Chainalysis estimated investors spent $4.6 billion worth of crypto buying the nearly more than 9,900 different suspected fraudulent tokens it identified.

The most prolific purported pump and dump creator Chainalysis identified — who was not named — is suspected of single-handedly launching 264 such tokens last year, with the firm explaining:

“Teams launching new projects and tokens can remain anonymous, which makes it possible for serial offenders to carry out multiple pump and dump schemes.”

Chainalysis classified a token as being “worth analyzing” as a potential "pump and dump" if it had a minimum of 10 swaps and four back-to-back days of trading on decentralized exchanges (DEXs) in the week after its launch. Of the 1.1 million new tokens launched last year, only over 40,500 fit the criteria.

If a token from this group saw a price decline in the first week of 90% or greater Chainalysis deemed it likely the token was a "pump and dump." The firm found that 24% of the 40,500 tokens analyzed fit the secondary criterion.

*A table showing the analytic breakdown and number of tokens purported to be fraudulent. Source:* *Chainalysis*

Chainalysis estimated that only 445 individuals or groups are behind the suspected pump-and-dump tokens — suggesting creators often launch multiple projects — and made $30 million in total profits from selling their holdings.

“It’s possible, of course, that in some cases, teams involved with token launches did their best to form a healthy offering, and the subsequent drop in price was simply due to market forces,” the firm added.

Despite the concerning statistics, in a separate report, the firm noted revenues from crypto scams were cut almost half in 2022 largely due to depressed crypto prices.

SEC Charges 2 Firms and 4 Individuals in Crypto Pump-and-Dump Scheme

October 1, 2022 Bitcoin.com

ASIC targets pump and dump Telegram groups

October 15, 2021 Coin Telegraph

ASIC

“Coordinated pumping of shares for profits can be illegal. We can see all trades and have access to trader identities,” said ASIC in a message to the ASX Pump Organization on Telegram.

The Australian Securities and Investments Commission (ASIC) is going after pump and dump groups on Telegram.

On Monday an account under the name “ASIC” posted a message in the “ASX Pump Organization” on Telegram to warn around 300 members of the group that “we’re monitoring this platform and we may be investigating you.”:

“Coordinated pumping of shares for profits can be illegal. We can see all trades and have access to trader identities. [...] You run the risk of a criminal record, including fines of more than $1 million and prison time.”

Many of the group’s members assumed the account to be fake, however ASIC confirmed the validity of the now-deleted message to The Australian newspaper.

While some members of the community have laughed off the message from ASIC, others have vented their frustrations at being targeted instead of firms and corporate traders.

“What ASIC needs to do is go after the corporates who inside trade and short companies all the time, and not spend valuable time here hassling 300 small investors who are doing nothing wrong by sharing stock recommendations. This has to be the biggest joke in history,” a member wrote.

On Sept. 23 ASIC published a warning about a “concerning trend” of social media groups engaging in “blatant” pump and dump campaigns. It stated that “in some cases, posts on social media forums may mislead subscribers by suggesting the activity is legal,” before warning of prison sentences of up to 15 years and fines of more than $1 million.

“ASIC has been working closely with market operators to identify and disrupt pump and dump campaigns, and we will continue to target actions that threaten the integrity of markets and to take enforcement action where appropriate,” said ASIC Commissioner Cathie Armour as part of the release.

Crypto-based pump and dumps weren’t specifically targeted by ASIC, however a spokesperson for the regulator told Cointelegraph:

“The campaign is targeting listed stocks but the messaging is relevant for all financial products, including any crypto assets that may be, or involves, financial products.”

“Even where the activity relates to cryptocurrencies/products that may not be financial products under the Corporations Act, the pump and dump practice is concerning as it can lead to investor losses and create unnecessary price volatility,” the representative added.

Pump and dump groups have grown in popularity this year after the r/wallstreetbets and Robinhood saga in January. The Reddit group —which is admittedly more about the pump than the dump — collectively worked together to pump stocks that hedge funds were shorting against such as GameStop (GME) and AMC Entertainment (AMC).

Crypto pump and dump