Staying Safe From Crypto Pump and Dump
Have you ever experienced the overwhelming nature of social media? Whether you’re scrolling through Twitter or watching YouTube, it feels like an endless stream of advertisements, right? Amidst the diverse array of advertising, it becomes crucial to stay vigilant against potential malicious ads. If you’ve sensed this bombardment, you’re certainly not alone.
In recent times, the expansive growth of social media has increased the threat of fraud to new heights. This escalation is attributed to social media’s influential capacity to shape individuals’ perceptions, especially regarding potential investment opportunities. Consequently, exercising caution is imperative, particularly when dealing with crypto influencers and anything promising substantial gains through dubious altcoins. Some of these deceptive tactics fall under the category of pump-and-dump schemes. To safeguard yourself from becoming a victim of a rug pull, it’s essential to understand what crypto pump-and-dumps entail and how they operate.
What constitutes a crypto pump-and-dump scheme?
A pump-and-dump scheme is a fraudulent tactic that leverages hype and misinformation to artificially inflate interest in an altcoin, token, or coin lacking a clear and immediate purpose. Perpetrators acquire substantial amounts of dubious coins when the price is low, subsequently driving up the price through promotional efforts on social media.
While pump-and-dump schemes were historically propagated through word of mouth, the advent of the Internet has shifted this dissemination to social media platforms, forums, videos, and other online channels. Fraudsters collaborate with influencer investors who receive financial incentives for promoting and increasing the value of a questionable coin.
Once the price peaks and the misinformation triggers a buying frenzy, both fraudsters and influencers execute a “dump” by cashing out, yielding substantial profits. This mass sell-off precipitates a sharp decline in the coin’s price, often falling well below its initial value. Most coin holders are unable to sell in time, resulting in significant financial losses.
It is crucial to note that all pump-and-dump schemes are illegal and carry severe consequences, including substantial fines, if individuals are caught engaging in such activities.
To illustrate the mechanics of this fraudulent practice, let’s examine an example:
Suppose a token, named PerkMoon, is promoted in an Instagram post by a renowned rapper and crypto influencer, Youp Dang. Following Youp Dang’s Instagram post, the price of PerkMoon skyrockets. However, a few days later, the coin’s developers commence selling all their shares. Unaware of the impending risk, you find yourself unable to sell your coins, leading to a rapid decline in the original sell price. Consequently, your investment evaporates, and PerkMoon fades into obscurity. This scenario exemplifies how many individuals fall victim to the deceptive tactics of crypto influencers.
How does a crypto pump-and-dump scheme operate?
The fundamental question surrounding pump-and-dump schemes is why they are so effective. Despite their existence for an extended period, what draws individuals to engage in pump-and-dump schemes? The answer lies in FOMO, or the fear of missing out. As misinformation and hype are disseminated, many investors become overly enthusiastic about potential profits and invest without conducting thorough research. Driven by the fear of missing out, these individuals make impulsive share purchases.
ICOs and their connection to pump-and-dump schemes
To amplify their illicit gains from crypto pump-and-dump schemes, perpetrators often explore initial coin offerings (ICOs), which resemble fundraisers. Investors who believe in a particular token contribute funds to its development, receiving new tokens as a reward. ICOs utilize the raised capital to further develop the respective coin.
Unfortunately, not all ICOs adhere to legitimate practices, as some are fraudulent schemes. Fraudsters specifically target ICO investors, who are predisposed to making purchases. Additionally, certain bots, known as “pump bots,” can swiftly execute share transactions within seconds. Even in the presence of a legitimate ICO, these pump bots may impact the token, investors, and prices at the outset of a release merely by operating and attracting users.
To discern between a secure ICO and a fraudulent one, it is essential to understand the components of an ICO. Legitimate ICOs typically commence with a comprehensive white paper outlining the project’s nature, applications or use cases, project completion requirements, and required funding.
Red flags indicating a fraudulent ICO may include:
- Lack of a whitepaper
- Suspicious-looking code in the ICO
- Difficulty in contacting developers for Q&A sessions
- Unrealistic working model in the whitepaper
- Inauthentic identities or known frauds behind the ICO
- Inadequately detailed or unclear roadmap
Examples of pump and dump schemes
FaZe Clan and Save the Kids Crypto
Several members of the FaZe Clan, an esports organization, endorsed the altcoin Save the Kids. Through Tweets and videos, they promoted the cryptocurrency, leading people to invest. However, within a few days, the altcoin plummeted by 60%. Allegations suggest that FaZe Clan members artificially inflated interest in Save the Kids and subsequently executed a potential rug pull, prompting their suspension or removal from the clan. Despite denials, Save the Kids crypto raises suspicions of a pump-and-dump scheme.
Tana Mongeau and TitsCoin
Influencer Tana Mongeau engaged in a scheme reminiscent of FaZe Clan’s by promoting her coin on Instagram. In short, the coin turned out to be a pump-and-dump scheme, resulting in financial losses for investors.
Have you ever experienced the overwhelming nature of social media? Whether you’re scrolling through Twitter or watching YouTube, it feels like an endless stream of advertisements, right? Amidst the diverse array of advertising, it becomes crucial to stay vigilant against potential malicious ads. If you’ve sensed this bombardment, you’re certainly not alone.
In recent times, the expansive growth of social media has increased the threat of fraud to new heights. This escalation is attributed to social media’s influential capacity to shape individuals’ perceptions, especially regarding potential investment opportunities. Consequently, exercising caution is imperative, particularly when dealing with crypto influencers and anything promising substantial gains through dubious altcoins. Some of these deceptive tactics fall under the category of pump-and-dump schemes. To safeguard yourself from becoming a victim of a rug pull, it’s essential to understand what crypto pump-and-dumps entail and how they operate.
What constitutes a crypto pump-and-dump scheme?
A pump-and-dump scheme is a fraudulent tactic that leverages hype and misinformation to artificially inflate interest in an altcoin, token, or coin lacking a clear and immediate purpose. Perpetrators acquire substantial amounts of dubious coins when the price is low, subsequently driving up the price through promotional efforts on social media.
While pump-and-dump schemes were historically propagated through word of mouth, the advent of the Internet has shifted this dissemination to social media platforms, forums, videos, and other online channels. Fraudsters collaborate with influencer investors who receive financial incentives for promoting and increasing the value of a questionable coin.
Once the price peaks and the misinformation triggers a buying frenzy, both fraudsters and influencers execute a “dump” by cashing out, yielding substantial profits. This mass sell-off precipitates a sharp decline in the coin’s price, often falling well below its initial value. Most coin holders are unable to sell in time, resulting in significant financial losses.
It is crucial to note that all pump-and-dump schemes are illegal and carry severe consequences, including substantial fines, if individuals are caught engaging in such activities.
To illustrate the mechanics of this fraudulent practice, let’s examine an example:
Suppose a token, named PerkMoon, is promoted in an Instagram post by a renowned rapper and crypto influencer, Youp Dang. Following Youp Dang’s Instagram post, the price of PerkMoon skyrockets. However, a few days later, the coin’s developers commence selling all their shares. Unaware of the impending risk, you find yourself unable to sell your coins, leading to a rapid decline in the original sell price. Consequently, your investment evaporates, and PerkMoon fades into obscurity. This scenario exemplifies how many individuals fall victim to the deceptive tactics of crypto influencers.
How does a crypto pump-and-dump scheme operate?
The fundamental question surrounding pump-and-dump schemes is why they are so effective. Despite their existence for an extended period, what draws individuals to engage in pump-and-dump schemes? The answer lies in FOMO, or the fear of missing out. As misinformation and hype are disseminated, many investors become overly enthusiastic about potential profits and invest without conducting thorough research. Driven by the fear of missing out, these individuals make impulsive share purchases.
ICOs and their connection to pump-and-dump schemes
To amplify their illicit gains from crypto pump-and-dump schemes, perpetrators often explore initial coin offerings (ICOs), which resemble fundraisers. Investors who believe in a particular token contribute funds to its development, receiving new tokens as a reward. ICOs utilize the raised capital to further develop the respective coin.
Unfortunately, not all ICOs adhere to legitimate practices, as some are fraudulent schemes. Fraudsters specifically target ICO investors, who are predisposed to making purchases. Additionally, certain bots, known as “pump bots,” can swiftly execute share transactions within seconds. Even in the presence of a legitimate ICO, these pump bots may impact the token, investors, and prices at the outset of a release merely by operating and attracting users.
To discern between a secure ICO and a fraudulent one, it is essential to understand the components of an ICO. Legitimate ICOs typically commence with a comprehensive white paper outlining the project’s nature, applications or use cases, project completion requirements, and required funding.
Red flags indicating a fraudulent ICO may include:
- Lack of a whitepaper
- Suspicious-looking code in the ICO
- Difficulty in contacting developers for Q&A sessions
- Unrealistic working model in the whitepaper
- Inauthentic identities or known frauds behind the ICO
- Inadequately detailed or unclear roadmap
Examples of pump and dump schemes
FaZe Clan and Save the Kids Crypto
Several members of the FaZe Clan, an esports organization, endorsed the altcoin Save the Kids. Through Tweets and videos, they promoted the cryptocurrency, leading people to invest. However, within a few days, the altcoin plummeted by 60%. Allegations suggest that FaZe Clan members artificially inflated interest in Save the Kids and subsequently executed a potential rug pull, prompting their suspension or removal from the clan. Despite denials, Save the Kids crypto raises suspicions of a pump-and-dump scheme.
Tana Mongeau and TitsCoin
Influencer Tana Mongeau engaged in a scheme reminiscent of FaZe Clan’s by promoting her coin on Instagram. In short, the coin turned out to be a pump-and-dump scheme, resulting in financial losses for investors.
Tips to Avoid Falling for Crypto Pump-and-Dump Schemes
Conduct Thorough Research: Uncovering a potential pump-and-dump involves in-depth research. Examine the altcoin’s whitepaper and investigate the company supporting the token.
Be Wary of Unrealistic Deals: While exceptions exist, be cautious of deals that seem too good to be true. Unrealistically favorable conditions may indicate a scam.
Exercise Skepticism Regarding Sources: Pump-and-dump schemes often deploy marketing materials and press releases to attract investors. Verify information from these sources skeptically, as developers can create fake websites and social media accounts.
Avoid Cryptos from /r/CryptoMoonShots: Cryptocurrencies promoted on the subreddit /r/CryptoMoonShots are likely schemes. This subreddit tends to endorse questionable coins. Steer clear of coins with names like “elon,” “safe,” or “moon.”
Recognize Pump-and-Dump Patterns: Understanding the characteristics of a pump-and-dump is crucial for safeguarding your investments. Scrutinize potential investments for the red flags mentioned earlier.
Conduct Background Research on Individuals Involved: Investigate the developers involved in the project. Legitimate blockchain projects typically provide developers’ names and photos on their websites and LinkedIn pages, enhancing transparency and accountability.
In the rapidly evolving space of altcoins and crypto, vigilance is very important. Whether dealing with pump-and-dump schemes or other endeavors, stay alert to potential exploitation. However, don’t let such schemes discourage your involvement in Bitcoin or other legit digital currencies. Many reputable and secure crypto companies exist, ensure they pass your safety checks and approach investments with a discerning eye. Be wise, stay safe, and, above all, conduct thorough research before making any investment decisions.