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Pump and Discharge in Crypto: Cases, Measurements, Warnings

The Pump and Discharge, an age-old scheme to quickly increase the value of a worthless asset, then to sell it to reap the benefits of the price increase. Not only is the securities law illegal, but it is also very popular in the world of Blockchain technology, cryptocurrency and digital assets. The price of a worthless asset – usually a penny stock with a small market capitalization – is artificially inflated by well-planned marketing. False statements, misleading statements, a lot of messages on social networks, co-banners and other quibbles are used to convey the message that a worthless asset is actually a hot buy that investors do not want to miss (the pump)

To support these claims, the price of worthless assets is increasing rapidly because of the well-planned pump. Once investors have learned about worthless assets and are seeing its price rise rapidly, more and more investors are starting to buy shares.

It is then that individuals who sell or deposit "Shares of the asset overvalued.These people profit from the sale of the asset at its peak or near the one For many times more than the price at which he bought it.When they start selling their stock of overvalued assets, the price of the asset will load and correct for a more accurate valuation. and appropriate.

Internet for Pumps and Discharges

Before the invention of the Internet, the pump and discharges were much more difficult to organize.Individuals had to arrange the pump and landfills in person, by phone or by post The pumping and emptying systems were often organized by Boiler Rooms, outbound call centers that were known to use dishonest sales tactics such as promotion of penny stocks for Generate Profit

Run a pumping and dump system. Nowadays, people converse in chat rooms, via messaging apps, and on Internet chat rooms to coordinate a pump and a dump. With all the places that the Internet offers for dialogue, the Commodities Futures Trading Commision (CFTC) is wary of what the pump and landfill projects could even push the professional investors to take a risk that they will not be able to. they did not intend to suffer.

CTFC Virtual Currency Client Protection Notice

On February 15, the CTFC issued its first Pump and Dump Virtual Customer Protection Advisory Notice

"Customers should be aware that these frauds have evolved and are spreading online – even experienced investors can become targets of professional fraudsters who are experts at deploying seemingly credible information in order to deceive."

The notice even quoted messages from an online chat room.]

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"15 minutes before the pump! Prepare to buy. "" Five minutes until the pump, the following message will be the piece! Tweet about us and send all the link to the telegram (sic) for foreigners to see what we are pumping so that they can get into the action too !! let [sic] take it to the moon !!!!! "

In the scheme cited above, the entire process of pumping and emptying lasted only eight minutes.

The CTFC warns consumers:


"Customers should avoid buying virtual currency or tokens based on shared advice on social media.The program organizers will generally spread rumors and encourage immediate purchases. will generally react to the rising price of the currency or token, and not check the rumors.Then the discharge begins.The price drops and the victims end up with currencies or tokens that are worth much less than what they from start to finish, these scams can be completed in minutes. "


As the cryptocurrency market continues to grow, organ Government agencies are attracting the attention of the growing market. that he needs to develop. This includes the publication of detailed reports such as the CFTC Primer on Virtual Currencies, the holding of hearings with Congress and the provision to consumers of all available information to limit the risk of fraud or manipulation.

Landfill systems are illegal and considered securities fraud by the SEC. In most regulated markets such as the London Stock Exchange and the New York Stock Exchange, they are also illegal. The CTFC even offers a 10% to 30% bonus for pump and discharge informers who are able to bring the CTFC to monetary penalties of $ 1 million or more.

However, pump and landfill projects are not illegal. cryptocurrency exchanges. Cryptocurrency exchanges are not regulated; there is no piece of the legislature about cryptocurrency exchanges. So even if a pump and a dump is unethical, it is not yet illegal (for the moment).

Cointelegraph contacted the anti-money laundering specialist, Joe Ciccolo, founder of BitAML. money laundering solutions for digital currency startups. Asked about the legal status of pumps and dumps on the cryptocurrency market, and if it is possible to denounce in an unregulated industry, Ciccolo said:

"The CFTC, Like other financial regulators, continue to leverage existing execution resources Whistleblower programs, a common regulatory tool, have generally worked remarkably well to put crucial and credible information in the hands of investigators. has legitimately given priority to education and consumer protection by focusing on the detection and deterrence of fraudulent activities, such as pumps and landfills, without stifling early innovations in the industry. crypto space. "


A well-planned pump and discharge could yield investors more than 100% return on investment. In one case, an altcoin pumping unit was able to pump the price of parts by more than 950%. On July 2nd at 11:40, the moderator of the chat room announced that the next pump would take place in 20 minutes on Bittrex. 15 minutes later, the moderator announced that the pump and discharge would take place in 5 minutes (12:00). At 12 o'clock the moderator announced the name of the play, SLS, and sent a link to the relevant market on Bittrex. At the beginning of the pump, the SLS was worth 0.0046 BTC ($ 11.61 according to the July 2 price). At the pump level, SLS was worth .0438 BTC ($ 110 based on the July 2 price), and after the discharge, SLS was back at .0059 BTC ($ 14.90).

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Source of the Image : Altcoin Pumping Unit 2/2 Telegram

In November 2017, a Business Insider survey revealed that traders were coordinating pumps and landfills on Bittrex and Yobit via Telegram messaging application. Shortly after, Bittrex issued a statement:

"A general statement about tactics of market manipulation: Bittrex is actively discouraging any kind of market manipulation, including pumping groups. to our terms of service, we will suspend and close all accounts engaged in this type of activity and will notify the proper authorities. "

Following the announcement, the pumping groups Telegram have warned their members that Bittrex be cracking down on manipulative behavior. One group – trading signals for crypto – canceled its pump and dumps due to Bittrex's policy change. Another group, Fake Pump & Dump Hunter, was interested in whether Bittrex's announcement was an alarmist tactic or whether it had actually been applied. Fake Pump & Dump Hunter has asked all users whose account has been suspended by Bittrex to contact them.

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Source Image: Business Insider

Pumping and dump groups often have thousands of members. At one point, the trading signals for crypto had more than 7,000 members. Some members are professional investors and pump organizers who have invested in the money before the date of the pump; others are retail investors, who discover which piece is pumped at the same time as the pump begins

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Four warnings from the CTFC

Although the industry of the cryptocurrency matures and takes the necessary steps to merge the traditional banking and financial system. Blockchain and cryptocurrency is still in its Wild West phase. Due to a lack of regulation and consumer protections in the cryptocurrency markets, there are still enough possibilities to set up fraudulent and manipulative schemes like pump and discharge. That's why it's always best to do independent research on the assets in which you want to invest and take only a risk that allows you to sleep comfortably at night.

Protecting investors from market manipulation, CTFC's opinion also gave consumers the following warnings:

  • "Do not buy any coins or tokens due to one tip, especially if it's social media.
  • Do not believe ads or websites that promise a quick wealth by investing in certain coins or tokens
  • Not to participate in pumping and dump operations, the manipulation of the market is against the law and many participants end up losing money.
  • There is no guaranteed investment or trading strategy. If anybody tells you that there is no risk of losing money. Money, do not invest. "