According to Chainalysis, nearly a quarter (24%) of cryptocurrency tokens issued last year showed telltale signs of a pump-and-dump scam scheme.
Pump-and-dump schemes are common in traditional finance. Scammers typically sell their assets to other investors, driving prices up rapidly. At a certain point, they sell overvalued stocks at a profit, causing prices to plummet.
Crypto-tokens, tradable digital assets built on the blockchain of another cryptocurrency, are growing in popularity among the same scammers.
“This is largely due to the fact that bad actors can establish artificially high prices and market caps ‘on paper’ by launching new tokens, seeding initial trading volumes, and controlling circulating supply. It’s a thing,” explained Chainalysis.
“Additionally, teams launching new projects and tokens can remain anonymous, allowing serial criminals to run multiple pump-and-dump schemes.”
A blockchain analytics firm looked at the 1.1 million tokens launched last year on the Ethereum and BNB blockchains. Virtually all said they saw little activity after launch.
Of the 40,521 high-profile tokens, 9902 (24%) saw a 90% price drop in the first week after launch and were culled as pump-and-dump scams.
It appears the same scammer was involved in multiple scams last year. According to Chainalysis, the most prolific individual issued 264 questionable tokens in 2022.
“In total, buyers not believed to be associated with the token creators spent a total of $4.6 billion worth of cryptocurrency to buy some of the 9902 questionable pump-and-dump tokens we identified. It’s a relatively trivial sum compared to trillions of cryptocurrencies. Although trading volumes have increased in 2022, it’s still a significant loss to unsuspecting investors.” is closing.
“We estimate that the creators of these tokens sold their holdings for a total profit of $30 million before the tokens plummeted in value.”
