Pump and Dump Schemes Being Organized on Telegram App

Published on 15 November 2017 by Business Insider

Areport by Business Insiderfound that Russian app Telegram has become a popular place to orchestrate pump and dumps, owing to the fact that it is heavily encrypted, and allows users to keep their identities a secret. Traders are generally invited to join Telegram channels, with names such as PumpKing Community, Pump.im, We Pump, and Crypto4Pumps, with the promise of being able to make a quick buck.

In true ‘Wolf of Wall Street’ fashion, pump and dumps are coordinated buying movements which lead to an artificial rise in the price of a particular cryptocurrency (a ‘pump’) – once outside buyers notice the price rise and start buying in (spurred on by the ‘pumpers’ via social media and online forums), the group orchestrating the price inflation rapidly sells off their crypto at high prices (i.e. the ‘dump’), leaving unsuspecting second-wave investors to incur losses as the price drops.

The BI report found that Telegram channels for pump and dumps rely on cross-promotion to grow their numbers, and pump and dump scams are advertised well in advance, with specified dates, times and trading venues. The target coin, however, is revealed only moments before the execution of the scam, so everyone gets a fair shot at buying up.

Unfortunately, the crypto market is rife with pump and dump schemes – an activity which, in addition to being unethical, is illegal in other Government-regulated markets for assets such as bonds and stocks. However, owing to the lack of regulation, the crypto market is still a Wild West where, more often than not, ‘pumpers’ tend to walk away freely after making a profit.

While cryptocurrencies have much good to offer, the market for digital currencies is still in its early stages, and regulators are gradually starting to realize the challenges and requirements associated with developing solutions and regulatory frameworks for the crypto market. Until some ground rules are laid down, however, investors should treat sudden, inexplicable spikes in prices with extreme caution.