How To Avoid Pump & Dumps

By Cyfab | Cypherpunk 2.0 | 29 Mar 2023


24% of the cryptos released in 2022 would have been pumps and dumps.

How to recognize pump and dumps?

A "pump and dump" scheme is a type of investment fraud that involves artificially inflating the price of a stock or other asset and then selling it at a profit to unsuspecting investors. Here are some warning signs that may indicate a pump and dump scheme:

  • High-pressure sales tactics: If you're receiving unsolicited emails or phone calls urging you to buy a particular stock, be wary. Legitimate investment opportunities usually don't involve high-pressure sales tactics.
  • Vague or misleading information: Be skeptical of investment opportunities that promise big returns with little or no risk, or that provide vague or incomplete information about the company or its products.
  • Sudden spikes in price or volume: If a stock's price or trading volume suddenly spikes without any clear explanation, it could be a sign of a pump and dump scheme.
  • Insider trading: If insiders or promoters are buying large amounts of a stock before promoting it to the public, it could be a sign of a pump and dump scheme.
  • Lack of financial information: Be wary of companies that don't provide detailed financial information, such as income statements or balance sheets. Legitimate companies usually provide this information to investors.
  • Promotions on social media: Be cautious of investment opportunities promoted heavily on social media, especially if they involve celebrity endorsements or unsolicited messages.

If you suspect that you have been the victim of a pump and dump scheme, report it on social networks or on Publish0x.

Examples of pump and dumps

Pump and dump schemes are unfortunately common in the cryptocurrency market. Here are a few examples of well-known cryptocurrency pump and dump schemes:

  • Bitconnect: Bitconnect was a cryptocurrency lending platform that promised high returns to investors. However, it was later discovered that the platform was a Ponzi scheme. In January 2018, the price of Bitconnect's token (BCC) spiked to over $400 before crashing down to less than $10.
  • Verge: Verge is a privacy-focused cryptocurrency that has been the subject of several pump and dump schemes. In December 2017, the price of Verge's token (XVG) increased by over 1,000% in a matter of days before dropping back down to its original value.
  • Dogecoin: Dogecoin is a cryptocurrency that was created as a joke. However, it has been the subject of several pump and dump schemes over the years. In January 2021, the price of Dogecoin spiked by over 800% in a matter of days before dropping back down.
  • Centra Tech: Centra Tech was a cryptocurrency debit card company that raised over $32 million in an initial coin offering (ICO) in 2017. However, it was later revealed that the company's founders had a history of fraud and that the ICO was a pump and dump scheme. The founders were eventually arrested and charged with fraud.

It's important to remember that not all cryptocurrencies are involved in pump and dump schemes, and that there are legitimate investment opportunities in the cryptocurrency market. However, it's crucial to be cautious and do your research before investing in any cryptocurrency.

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Cyfab
Cyfab

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