Cryptocurrency: No Crisis for Pump and Dump Cryptocurrency Gangs
Enzyme, also known as MLN, surged from 30 cents to 47 cents in minutes and daily trading volumes skyrocketed from around $3 million to over $100 million, according to CoinGecko.
A few hours later it was down to 35 cents.
The coin had just been “pumped and dumped,” an age-old scam when traders get together and orchestrate a price hike to make a quick profit.
“In the stock market, pumping and dumping is illegal, which is why criminals take advantage of the less robust regulatory framework around crypto assets,” said Mircea Mihaescu of the Coinfirm compliance team.
The crypto economy has been torn to shreds in recent weeks with hundreds of billions of dollars slashed from the value of the sector and some currencies collapsing altogether.
The scam industry – worth an estimated $7.8 billion last year according to data from Chainalysis – hasn’t given up, however.
Scammers continue to find fertile ground on the Telegram and Twitter app, positioning themselves as benevolent heroes helping those lost in the crash.
The rationale hinges on the cult nature of crypto investing, but experts say that’s far from the truth.
– ‘Shill it on Twitter’ –
The May 15 call to arms came from a Telegram group called WallStreetBets – Pumps.
After several posts building up the hype, the group wrote, “The coin we’re buying is $MLN…Shill it on Twitter to make it trending.”
Twitter immediately fired up.
“Whales are piling up, it’s worth it!” tweeted a user called CryptoSanta, referring to the nickname of mega-rich investors.
Enzyme Finance, the company that owns the MLN coin but has no connection to the Telegram channel, quickly tried to calm things down.
“Please beware of fake accounts seeking to operate pump and dump systems,” the company tweeted, distancing itself from the feeding frenzy.
But anyone who saw the Telegram posts or the hype on Twitter knew their only chance to make a profit was to get in and get out fast.
In reality, almost all of them would have lost. The price spike only lasted a few minutes and the only ones who guaranteed success were those organizing the scam.
“In any pump-and-dump program, everyone is convinced that they are the pumper,” said behavioral economist Stuart Mills of the London School of Economics.
AFP could not reach WallStreetBets – Pumps for comment.
But they are far from the only group openly pumping coins on Telegram.
Kucoin Crypto Pumps Trading, for example, is already announcing a scheduled pump for next week. Monaco Pump Group claims to be run by “two of Monaco’s wealthiest whales”.
– ‘Mega whales’ –
In fact, data scientist Matt Ranger believes that most of these programs are run by groups of low-level career chancers and scammers with one primary skill: marketing.
“You don’t need to know how to write a line of code,” he said of pump-and-dump schemes.
Telegram groups are broadcasting messages that tap into the sense of grievance at the heart of the crypto economy – the sense that traditional economic institutions have failed young people.
“This signal was for everyone to recover from the recent events of Luna,” the WallStreetBets group said, referring to the failure of a major crypto project called terra/luna.
And the group thanked the “mega whales” for helping to boost the value.
The insular world of crypto creates its own fictions, where billionaires sacrifice themselves for the good of the community.
This goes hand in hand with currently popular conspiracy theories that the crypto economy crash was engineered by investment firms like BlackRock or
These companies, the theory goes, deliberately crushed bitcoin so they could buy into the space at a lower price.
Stuart Mills points out that this helps pump-and-dump groups dehumanize their victims and reinforce their own sense of grievance.
“All of a sudden these unethical ways become more justified,” Mills said. “I was screwed, so it’s time to fuck the bad guys.”
However, Matt Ranger points out that in crises like this, such scams quickly become unsustainable.