Telegram, an instant messaging service founded by Pavel Durov, is being used by cryptocurrency scammers to coordinate pump-and-dump schemes, as reported by Business Insider. These scammers create exclusive groups, in which they share information and organize attacks to make a profit off the losses suffered by unaware traders.
The phenomenon of pump-and-dump is not uncommon in other trading venues either, particularly stocks and equities markets. However, the strict regulations imposed on those markets make this sort of price manipulation illegal, as opposed to the unregulated crypto world. In fact, the recent pump and dump plans in the crypto sphere may be being coordinated by outside forces.
Telegram of loss
The Russian app, Telegram, appears to be the main venue where the pump and dump schemes are being perpetrated. According to Business Insider, a number of channels within Telegram are designed specifically for just this sort of market manipulation. With names like PumpKing Community, Crypto4Pumps and We Pump, these communities provide a venue for scammers to attract participants who then help the price move.
These channels offer information on specific coin pumps to those who subscribe and then encourage subscribers to buy in quickly. After the glut of buying and the resultant price increase, members reach out in other social media, encouraging further buying from unsuspecting victims. As the price continues to rise, the pumpers begin to sell, causing panic selling, and collapsing the price – the ‘dump.’
– A message distributed in Telegram to advertise one of the pump and dump groups
The victims are left holding the bag, and the coin value often ends lower than it did before the scam. The entire process is a scam from start to finish. With the SEC and other international regulating bodies coming on board, this phenomenon may be curtailed. However, for now, buyers should avoid such jumps unless underlying fundamentals provide reasons for the change.