Pump and dump crypto schemes worth $825m

August 08, 2018
Chris Wheal

The Wall Street Journal claims to have uncovered numerous “pump-and-dump” schemes involving digital coins.

Certain online forums are urging traders to act on buy signals but those behind the pump quickly take advantage of the artificially inflated price by selling their own holdings.

The tactic is thought to be especially effective with the lesser-known coins, where liquidity tends to be less deep.

Susceptible

As hundreds of traders react to buying signals all at the same time, some coins are particularly susceptible to very sharp rises.

The sell actions of those behind the pump schemes mean the same coins can fall extremely sharply within a matter of minutes or even seconds after the initial price increase.

The Wall Street Journal claims to have discovered 175 pump-and-dump schemes between January and July this year.

Pump and dump schemes worth $825m

Pump-and-dump schemes accounted for $825m in trading activity, according to the Wall Street Journal

Big Pump

An analysis of trading data and online communications between traders suggested the schemes accounted for $825m in trading activity.

It also found that around half of the 50 pump schemes with the sharpest price increases had lost value.

Unlike shares listed on the stock exchange, cryptocurrencies tend to fall outside the scope of the usual laws of market manipulation, making it difficult for those behind such frauds to be held to account.

The Wall Street Journal named Big Pump Signal as one of the biggest such schemes it had uncovered, a chatroom with 74,000 followers on messaging app Telegram.

Prime targets

In all, 105 groups were identified as offering trading signals on crypto coins via Telegram and rival Discord.

Many of the coins traded on the Binance exchange were found to be prime targets for pump schemes.

Among the coins believed to have been pumped by the chatrooms were Pesetacoin, Agrello, Stealth and cloakcoin.

One of the most successful pumps from Big Pump Signal saw one digital coin rise by over 70%, according to the Wall Street Journal.

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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