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Cryptocurrency’s popularity – just like its price – has grown exponentially over the years and has been the talk within the financial realm. However, crooked minds have devised ways to take advantage of the system at the expense of others. One of the most rampant is the so-called crypto pump-and-dump.
For the uninitiated, this pump-and-dump practice is a manipulative scheme with the goal to hype up the price of a certain stock or asset with the help of fraudulent endorsements. You mix those recommendations with lavish yet misleading statements and one will just have to wait for unknowing individuals to trickle in and fall for their trap.
In the financial sector, once investors are so into it and begin purchasing these bogus shares, the prices of these stocks will surge. Now, this is where these wolves feast. If the prices of these stocks look good enough for these scammers, they then sell all their shares as this will ultimately cause the stock price to take a huge dip.
Cryptocurrency folks call it a rug pull
As suggested above, this M.O. can also be done in cryptocurrencies where the only difference is that digital tokens – especially new ones – are being hyped up to pump their price. Telos Core Developers Chief Architect Douglas Horn explained that as the prices rise, the pump creators dump their assets into the FOMO (fear of missing out) they’ve generated, resulting in a price crash that leaves new buyers holding a bag of the assets that now have a lower value than they were purchased at, creating significant and often unrecoverable losses.
Developers who have a knack for coding can make as many new coins as they please. A good example of such is what is described as the “dogecoin killer” – Shiba Inu. Developers can roll out billions of these coins in the market, though its price would be way less than a penny. The price is so minute that one can buy hundreds of thousands of these without breaking the bank.
Another difference worth noting is how this pump-and-dump scheme is coined by the cryptocurrency community which is called a “rug pull.” It was named as such since scammers are like pulling a rug right out from under their ensnared investors. One of the reasons why investors are easily enticed to spend money on these new cheap tokens is that scammers claim that these are rug-proof meaning there’s a security measure embedded in them that bars people who have huge sums of coins from selling them off within a certain period.
Most recent pump-and-dump/rug pull
The cryptocurrency community especially followers of the eSports org FaZe Clan are still well-acquainted with the recent pump-and-dump scandal that some of its members are involved in. Four members of the said eSports collective alongside other content creators participated in endorsing a token known as SaveTheKids ($KIDS). They advertised this token to their followers and by the time its price surged, they started selling off the tokens that were given to them as part of such a devious plan to scam people.
FaZe Clan, on the other hand, immediately issued a statement revealing that they’ve slapped suspensions on three of their members namely Nikan, Teeqo, and Jarvis. As for the fourth member – Kay – he was kicked out of the organization.
The YouTuber Coffeezilla did a series of investigations on this SaveTheKids drama and discovered that more people could be involved in this cryptocurrency mess. In line with this, he just uploaded another video about it as he deemed it as his “final contribution to the story.”
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
