Beware of Crypto Scams: The Pump-and-Dump Scheme

Cryptocurrency scams are evolving, but the essence of crime remains unchanged. When cryptocurrencies started being exchanged, scammers viewed exchanges like banks ripe for the taking. However, not every hacker can penetrate these systems, as security has improved significantly. Scammers now employ tactics reminiscent of the 1980s penny stocks. In particular, pump-and-dump groups manipulate altcoins, often worthless tokens, by artificially inflating their prices through coordinated buying. These groups recruit investors, who pay for information on which coins to target. The strategy involves purchasing a significant amount of an altcoin before prompting the group to buy it at a set time. This creates a dramatic price increase as demand spikes. However, the real operators begin selling during this peak, profiting off unsuspecting buyers, while portraying themselves as helpers to the community. As reported by the Wall Street Journal, there were 175 identified pump-and-dump schemes in crypto during the first half of 2018, with trading volumes reaching around $825 million. Groups like Big Pump Signal lead this trend, using social media to drive hype and profits primarily for insiders. Investors, drawn in by the promise of quick returns and dealing often in a single exchange, face significant risks. The reality is stark: while some may profit from pumps, the substantial gains are generally siphoned away by insiders. It's essential to remain cautious and skeptical of any promises of easy profits in the volatile world of cryptocurrency. Always conduct thorough research before making investment decisions.