Pump & Dump Schemes in Cryptocurrencies with Examples

If you're not new to the finance world, you've probably heard of pump and dump schemes. It is the act of artificially increasing the price of an asset by building false hype around it and then profiting from it, in the process, legitimate investors lose money.

An example is of a cryptocurrency named Komodo(KMD). Groups exist on a Russian app named "Telegram" consisting of thousands of users. The admins set specific targets for coins. These coins are bought at the initial low price such as $0.51.

After the initial buy occurs, the users and admins start to spread false hype & recommendations around the coin with phrases such as, "Its the next big thing", "It's going to the moon!" and people obviously buy because of the "fear of missing out(FOMO)" which is pumping the coin.

The trade volume has massively increased because of the sharp surge of a new wave of buyers actually lifting the price from 10x to over 100x whereas only few people(the scammers) actually know the reason behind it.Once the price is high, the dumping process starts.The scammers start to sell all their coins and by the time they're done, they have profited and legitimate investors are left with a coin with a price sometimes even lower than the initial price of $0.51.

However not all users of such groups profit, some of these groups have admins that pre-buy even before announcing the coin to the group and once the group buys, they end up dumping it or in other ways they dump without telling the group.

A reason why this goes unnoticed is that only admins can post to the group so no one else can point and warn other people of this scam.

So the point is, don't invest based on speculations and price surges, buy on coins that have innovative technologies behind them that offer value. And then there are some specific cryptocurrencies such as the top 10 on CoinMarketCap which can't be manipulated because of the large market capitalization so you're also safe with currencies that have a large market capitalization.

These practices are illegal in the stock market but due to no regulation in cryptocurrencies, there is little action taken against such people. Exchanges on which these schemes occur such as Bittrex have attempted to ban such accounts though.

If someone wants the links of such groups for research purposes, feel free to message me.