How to protect yourself from fraud when "pumping” and "dumping" cryptocurrencies

How to protect yourself from fraud when “pumping” and “dumping” cryptocurrencies


There are many types of cryptocurrency scams, and one of these schemes is called “Pump-and-Dump”, and if you don’t want to become a victim of such a scheme, keep reading, and let’s figure out what cryptocurrency “pumping” and “dumping” are, and how they work.

What is the scheme of pumping and dumping cryptocurrencies

The crypto space is growing, and according to, as of today, there are more than 14,000 cryptocurrencies. With such an abundance of crypto assets, naturally fraud will only flourish. “Pump-and-Dump” is one of the most popular schemes.

“Pumping and dumping” is a type of fraud that uses hype and misinformation to create false interest in an altcoin, token or coin that has no known and immediate purpose. Scammers first collect a large number of dubious coins when the price for them is still low, and then inflate the price by advertising them through social networks.

In the past, the schemes of “pumping and dumping” were spread by word of mouth (Vasya told Petya, and Petya shared with Kolya). Now, with the development of the Internet, most of the false information is spread through social networks, forums, videos and other online media. Scammers also work with influential investors who receive financial incentives for inspiring people and increasing the value of a dubious coin.

When the price reaches its peak, and misinformation causes a buying frenzy, scammers and influential investors “dump” all their cryptocurrencies, cashing them out with huge profits. As a result of the sale, the price of the coin will drop significantly below the original. Most coin holders will not be able to sell them in time, and will be left with a bunch of worthless coins on their hands. This means that they will get stuck with these questionable coins, and lose their money.

Keep in mind that there are various “pump and dump” schemes, and they are all illegal and have serious consequences (for example, large fines) if they are caught.

To give you an idea of how it all works, let’s take an example.

Let’s say a token (let’s call it a Ball Coin) is advertised in an Instagram post by a super-famous rapper and crypto investor. After the rapper’s Instagram post is published, the price of the Ball Coin soars sharply. However, after a few days, the coin developers start selling all their crypto assets. Without warning you about the impending danger, you do not have time to sell your coins, and the initial sale price drops sharply. Soon all your investment money disappears, and you will never hear about the Ball Coin again. This is just one example of how many people become victims of fraud by cryptocurrency authorities.

How the pump-and-dump cryptocurrency scheme works

The main question behind the “pump and dump” schemes is why do they work so well? Fraud has been around for a long time, so what attracts people to these schemes?

The answer is that these scams work on FOMO (fear of missing out). As misinformation and hype spread, many investors are so excited about the opportunity to make money that they invest it without proper research. These people do not want to miss their chance and buy coins impulsively.

  • ICO and “pump and dump” schemes

To get even more income from the schemes of pumping and dumping cryptocurrencies, these scammers are also considering initial coin offerings (ICOs), which are similar to fundraising. Investors who believe in a particular token invest their money in its development. In return, they receive a reward in the form of new tokens, and the ICO uses this money to further develop its coin.

Unfortunately, not all ICOs work this way, as some of them are schemes. Many scammers target ICO investors because these people are ready and willing to make a purchase. In addition, there are certain bots called “pump bots” that can buy and sell tokens in a matter of seconds. Even if a legitimate ICO is held, sometimes these bots can affect the token, investors and prices at the beginning of the issue, just by working and having users.

To understand the difference between a secure ICO and a fraudulent one, you need to know what it consists of. As a rule, it begins with a fully published “White Paper”, which indicates what the project is about, its application or use cases, the requirements for completing the project and how much money is needed.

A fraudulent ICO may have such signs:

  1. There is no white Paper
  2. The working model in White paper is not realistic
  3. The people behind the ICO have fake names or are known scammers
  4. ICO roadmap is not detailed enough or unclear
  5. The ICO code looks suspicious
  6. It is difficult to contact developers for Q&A sessions

Alleged “pump and dump” schemes

Now you know what a cryptocurrency scam is and how it works, let’s discuss well-known examples.

  1. FaZe Clan and Save the Kids Crypto: Several members of the FaZe Clan esports organization supported the new altcoin – Save the Kids. They advertised the cryptocurrency with a series of tweets and videos. People bought the coin, and a few days later the altcoin price dropped by 60%.

Members of the FaZe Clan who were involved in this scheme pumped money into Save the Kids, and then just brought down this token. Although they deny the charges, the Save the Kids cryptocurrency looks suspiciously like a “pump and dump” scam. Since then, the participants of the scam have been suspended or removed from the FaZe Clan.

  1. Tana Monjo and TitsCoin: Influencer Tana Monjo did something similar to the FaZe Clan scam when she advertised her coin on her Instagram. In short, this coin was a cryptocurrency that pulls the carpet behind it (pulling the rug is draining a widely advertised project). In other words, she “pulled the rug out from under the feet of investors” who invested in this dubious coin.

How not to fall for these schemes

So, we have discussed examples of signs of the basis of fraud with “pumping and dumping”. Now let’s move on to how to avoid these schemes. Follow these tips to save your hard-earned money.

  • Do some research

Part of the work to uncover the “pump and dump” scheme is to conduct research. If you want to find out if altcoin is cheating, try to study its technical documentation and conduct research on the company financing the token.

  • If it’s too good to be true…

Although this is not always the case, remember that usually if a deal is too good, then it is most likely a scam. Beware of amazing and fabulous offers that will meet everything you would like to get from cryptocurrency.

  • Be skeptical about the source

When a company tries to attract more investors, it releases marketing materials and press releases. It’s also very easy for developers to create fake websites and social media accounts, so don’t immediately mistake their content for the truth. Be sure to study these sources in the most meticulous way. Find a source of information that you can rely on before making hasty investment decisions.

  • Avoid Cryptocurrencies from /r/cryptomoonshots

If the cryptocurrency or the project you want to invest in is advertised in this subreddit, then it is most likely a scam. CryptoMoonShots is an echo chamber whose sole purpose is to distribute bad coins. Also stay away from coins with names like “Elon”, “safe” or “Moon”.

  • Understand what pump-and-dump looks like

Understanding what pump-and-dump looks like is the key to avoiding any fraud. Carefully study all the signs that we mentioned earlier and see if they correspond to your potential investments.

  • Conduct a study of the persons involved

Studying the biography of developers will help you learn not only about their skills and experience, but also give you confidence that they do not hide their identity. Most blockchain projects post the names and photos of their developers on their website, as well as on their LinkedIn pages, to prove their legitimacy. This means that if they ever make a mistake, you will know who is responsible for it.

Security in the cryptocurrency space

Since the world of altcoins and cryptocurrencies is a new and developing sphere, it can be difficult to keep track of scammers. Whether it’s a scheme of “pump and dump” cryptocurrencies or something else, always be on the alert if they try to use you to their advantage.

However, don’t let these schemes and scams scare you away from cryptocurrencies. There are many excellent and secure cryptocurrency companies. It is enough to recall such a blockchain project as DecimalChain, with its proven crypto asset called DEL.

Just make sure they have passed all your security checks before you decide to take the next step. So, be smart, stay safe, and most importantly, do your research.