The latest analysis coming from the Wall Street Journal, released on August 5th, revealed that tens of so-called “pump groups” use messaging apps such as Telegram and Discord for cryptocurrencies prices manipulation on several important cryptocurrency exchange platforms, generating more than $800 million in trading activities in the first part of 2018.
In its investigation, the Wall Street Journal found that more than 63 “pump groups,” which managed to pull off more than 170 pump and dump schemes, manipulating the prices of 121 cryptocurrencies, used Telegram and Discord to push different pump schemes.
The pump-and-dump schemes involving cryptocurrencies are similar to the traditional schemes pulled off with conventional stocks. Basically, the “pump groups” manipulate the market artificially surging an asset’s price, only to dump it later, causing massive losses for those who invested hoping to get rich fast.
The “pump groups” in the cryptocurrencies market usually manipulate the assets’ prices on unregulated crypto exchange platforms, so they don’t have to worry about authorities and sentences.
“Pump groups” used Telegram and Discord to pull off the pump and dump schemes involving cryptocurrencies
The schemes involving cryptos usually happen in private chats on Telegram and Discord, following a straightforward plan.
First, the groups are announcing a time and a date, as well as the crypto exchange platform. Next, at the set time, the scammers send a positive but fake signal regarding a crypto asset, which will cause its price to surge. People who hope to get rich rapidly by investing in cryptos start buying the asset, which pushes the price even higher.
Finally, the “pump groups” sell their coins and score the profits, dumping the crypto asset, causing massive losses for the other investors.
The U.S. Commodity Futures Trading Commission (CFTC), which addresses cryptocurrencies as commodities, issued the “Customer Advisory: Beware Virtual Currency Pump and Dump Schemes” to increase the investors’ awareness regarding the crypto-related scams, including pump-and-dump. They warned people not to “purchase virtual currencies, digital coins, or tokens based on social media tips or sudden price spikes,” and recommending traders to do their research before investing.