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WJS: ATTTENTION to “Pump Groups” that use Telegram and Discord to manipulate the crypto market
Editorial Team

Wall Street Journal’s report of August 5 elaborates that dozens pf “pump groups” on messaging apps such as Telegram are manipulating crypto prices on several large digital asset exchanges, generating over $825 million in trading activity in the first six months of 2018.

WSJ analysts reviewed the trading data and online chat amongst traders on messaging apps as Telegram and Discord and came across 175 “pump and dump” schemes involving 121 crypto tokens, with 63 pump groups found to be “actively pushing different pump schemes.”

The basic idea behind a “pump and dump” scheme is that the “pumpers” hype an asset causing its price to rise massively, before dumping it a short time later for a nice profit and leaving many investors with heavy losses. It is a fact that the lack of crypto regulation in most of the cryptocurrency exchanges led the market manipulators to not worry to get caught and punished.

According to the publication of cryptoglobe.com, the WSJ report says that the “pumping” usually occurs in groups or private chat rooms of online messaging platforms such as Telegram and Discord.

It presents the basic strategy of a typical crypto pump-and-dump scammer as follows:

  • announce a date, time, and place (some online exchange that supports many of the smaller/cheaper altcoins);
  • at the set time, announce (“signal”) the altcoin being pumped;
  • let traders get into a “buying frenzy”, which, of course, pushes the price higher;
  • a few minutes/hours later, sell the coin

Many of those groups that WSJ came across have monthly fees in the $50 to $250 range if you are not acting for them as an evangelist.

The traders that these pump groups, the gambling aspect of a playing a “game of crypto chicken” (i.e. buy as soon as the pump signal comes, try to hold long enough for the price to go up a decent amount, and ideally sell just before the dump occurs) is highly addictive.

A trader who played this game and lost enough was 27-year-old San Diego resident Taylor Caudle. As cryptoglobe.com reported, he was interviewed by WSJ. Claude said that “he lost $5,000 in about 30 seconds” at one pump event in January involving the DigixDao token. Moreover, he was urged to “maxed out a credit card to participate.”

The US Commodity Futures Trading Commission (CFTC), which treats cryptocurrencies as commodities, on February 15, 2018, issued an advisory (titled “Customer Advisory: Beware Virtual Currency Pump-and-Dump Schemes”) in order to warm investors not to “purchase virtual currencies, digital coins, or tokens based on social media tips or sudden price spikes.” On the contrary, it advises them to do so through research to “separate hype from facts.” On the same day, at a Senate hearing in February, Christopher Giancarlo, the CFTC Chairman said the following about manipulation of the crypto markets:

“What we will do and we are doing is looking for fraud and manipulation. And we intend to be very aggressive.”

 

 

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