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Business Crimes BulletinFeaturesRegulationWhite Collar Crime

Inside Cryptocurrency Pump-and-Dump Schemes

By Jonathan Bick
April 01, 2022

Cryptocurrency pump-and-dump schemes (CPDs) are becoming increasingly prevalent. As in the case of traditional "pump and dump" schemes, CPDs lead to short-term trading perturbations — exaggerated increases and/or decreases in prices, volume, or volatility. Prices peak or bottom out within a short time span and are usually accompanied by quick reversals, resulting in a manipulated inflation or deflation of an asset's price, usually accomplished via misleading recommendations. Since the inception of cryptocurrency as a widely traded asset, there has been increasing opportunity to make money through market manipulation, specifically through classic pump-and-dump and related fraudulent schemes, and more specifically CPDs.

While pump-and-dump schemes are common in traditional financial markets, cryptocurrency exchanges provide new and additional markets and methods to facilitate this practice. Though CPDs are new, CPD scammers utilize both traditional and novel implementation programs.

Traditional CPD programs employ email spam campaigns, social media fake press releases, and telemarketing. Novel CPD implementation programs vary widely, but they commonly include buying or selling crypto futures at above or below market in a particular cryptocurrency, and then spreading positive or negative rumors, typically via Discord and other apps, about said cryptocurrency in an attempt to manipulate its value.

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