7 ms·

“Pump-and-Dump” schemes in Telegram groups drive penny crypto coin prices up

90 points by baxtr 9y ago

lixtra 9y ago
Would this go away with more regulation? Is it fraud?
- pcwalton 9y ago
  Pump and dump is absolutely fraud (as it requires deception to work--note the "promote on social media" step), and you can go to prison for it. Jordan Belfort, the "Wolf of Wall Street" mentioned in the title, did.
  - lixtra 9y ago
    So how is it different from Bitcoin? Except for time scale? Is it the dump part?
    - pcwalton 9y ago
      Promoting investment in Bitcoin can (in theory) be legitimate if you sincerely believe that Bitcoin has real value. By contrast, pump and dump schemes involve lying about a security you know to be worthless (or at least worth far less than what you're saying). The fact that you dump it immediately makes it easy to prove this.
  - spunker540 9y ago
    I think if these were regulated securities being traded on regulated exchanges it certainly would be fraud and a jailable offense. But is it fraud for something like collectible beanie babies? (as far as I can tell that is basically how cryptocurrencies are regulated right now in the US).
    - pcwalton 9y ago
      If you make money by getting groups together to sell Beanie Babies falsely claiming that you have insider info that the fad is going to make a comeback, that is fraud, and you can go to prison for it.
      - spunker540 9y ago
        So I couldn’t legally advertise alongside marked up collectibles that “the fad is coming back!” Or I just couldn’t legally collaborate with others to do so? I feel like it’s not necessarily a false claim, just a hopeful one. As a corollary every company in some respect uses spin to become who they are (you gotta fake it til you make it). Half a decade ago Tesla was making outlandish claims about their ambitions and they’ve not stuck to many of their commitments but no one accuses Elon Musk of fraud. He’s hopeful, not fraudulent.
        acdha 9y ago
        In general it’s failing to disclose that gets you into trouble. Everyone knows that Elon Musk is not an unbiased source of information anout Tesla or their competitors because he doesn’t make any attempt to hide his investment.
      - jakear 9y ago
        How does this translate over to things like fashion/social trends in general? Something like "Corsets are coming back for spring 2018! Get on top of the trend at XYZ Fash Inc.!" hardly seems like fraud, but by that definition it would be.
        pcwalton 9y ago
        This is where a lawyer would have to answer. I'm certain that a detailed explanation would involve a mountain of cases and precedents. (I would guess that a lot of the precedent hinges on whether you are intentionally lying, or whether you are merely making a good-faith prediction. Pump-and-dump schemes are obviously the former.) The point is that, in general, deception for financial gain is fraud, more or less by definition. It doesn't have to involve regulated securities.
- erdo 9y ago
  Thing about these telegram pump and dump groups is they are usually NOT lying to anyone. It's all very transparent (if you're inside the group) pump the price when we tell you to, and do what you want once the price has gone up (and it does go up).
- AlexCoventry 9y ago
  Existing regulations are probably as adequate as they are for more traditional instruments. There needs to be better monitoring and enforcement, though.
adamnemecek 9y ago
Can anyone recommend any good books on things like this? Idk what "this" really is lol. Black hat economics? I’ve setup a slack channel for crypto discussion because most groups and subreddits are too shilly and memey. https://hncrypto.slack.com/join/shared_invite/enQtMjk5MDg2MzAzMTIwLTEzNmU2NzVlNWFkMjNmZDI1ZGU1NzQ3MTZmNzM0NDU2OTc0Y2Y2NWMxZjBkZmI1MzMxMDllOGIzOTgwYWQ4MmU https://hncrypto.slack.com/join/shared_invite/enQtMjk5MDg2Mz...
- qznc 9y ago
  Here is a draft of a book: https://cryptofrenzy.wordpress.com/2014/02/19/wolong-writes-a-book/ https://cryptofrenzy.wordpress.com/2014/02/19/wolong-writes-... The author is allegedly the guy behind the Dogecoin pump 2013.
  - samsonradu 9y ago
    Dogecoin actually managed to pull a pump-dump-pump? Its valuation looks quite good as we speak, even though I remember the dump (2015) [1] https://motherboard.vice.com/en_us/article/78xqxb/the-guy-who-ruined-dogecoin https://motherboard.vice.com/en_us/article/78xqxb/the-guy-wh...
wintom 9y ago
The real issue with all the pump and dump, fear of missing out, and all the other crazy “mooning” is that it is ruining this whole space. It is creating a reality that all the haters of cryptocurrency have been talking about for a while. Instead of focusing on building real applications with blockchain, programmable money, and changing the world everyone is focused on trading and get rich quick schemes. This stuff could change the world it is money ripped out of government hands and it could be baked into everything we do on the internet but I am not so sure that will happen anytime soon anymore. I am very jaded with the whole space because of all this fraud.
- Sangermaine 9y ago
  >It is creating a reality that all the haters of cryptocurrency have been talking about for a while. Or you might have it backwards: it's reality crashing against the near-religious fantasies that crypto boosters held for ideological and other reasons.
  - Waterluvian 9y ago
    Yeah it feels like a real-time experiment on the necessity of regulation and oversight.
    - CryptoPunk 9y ago
      On the contrary, it shows how the market responds and evolves on its own without top-down enforcement. These pump and dumps will eventually stop being effective, because in a situation where information flows freely, and there are no backstops or gatekeepers to protect investors from their own gullibility, natural selection and other bottom-up adaptive processes go to work. You can even see the growing 'immunity' that investors have to these pump-and-dump schemes on cryptocurrency forums. People on the forums are much quicker to see through attempts at coordinated pumps now than even a few months ago. Letting things play out results in a more robust configuration than trying to guide the market from the top-down through the creation of powerful gatekeepers and laws that rob people of their agency.
jraines 9y ago
It's only legal if you wear a suit and do it on CNBC. This is my expert opinion as a super lawyer.
milofeynman 9y ago
What other kinds of fraud that has occurred in the past (stock market, real estate, etc) are people going to try with crypto? So far we've seen some big ones (pump-and-dump, and pyramid scheme).
- Pmop 9y ago
  Painting the tape.
- buttcoinslol 9y ago
  Wash trading: https://medium.com/@bitfinexed/wash-trading-bitcoin-how-bitfinex-benefits-from-fraudulent-trading-8bd66be73215 https://medium.com/@bitfinexed/wash-trading-bitcoin-how-bitf... Allegedly unbacked reserve currencies (tether): https://www.coindesk.com/tether-confirms-relationship-auditor-dissolved/ https://www.coindesk.com/tether-confirms-relationship-audito... I'm sure there are more, any scheme/scam that gives someone an edge will be tried in an unregulated market.
avenoir 9y ago
Just a week ago I saw a guy pump and dump a random altcoin live on Twitter just to prove his "haters" that he doesn't leave his followers holding a bag when he does his scheduled PnDs. The level of arrogance is really astounding. Hell, all of the biggest bitconnect scammers with a following on YouTube have already moved on to shilling other lending platforms instead of just disappearing. Interesting to see this unravel and how long it can continue.
Simon_says 9y ago
"You can't con an honest man."
- Retra 9y ago
  You're not saying very much here, but... If you're someone looking to get rich investing in cryptocurrency, it's worth considering where the money (not the 'value') actually comes from. People have to spend it, and you have to take it. If you don't care where it comes from, you may as well be stealing it.
  - Simon_says 9y ago
    > If you're someone looking to get rich investing in cryptocurrency I'm not. I'm really really not.
    - Retra 9y ago
      I wasn't referring to you specifically.
KasianFranks 9y ago
Just like stocks http://investorshub.advfn.com http://investorshub.advfn.com
NicoJuicy 9y ago
Crypto seems to be a perfect example what I think big banks are doing in a "regulated space", eg. Downgrading all currencies except dollar, earning money on top of big clients ( pump scheme,... ) And etc.. It's just less obvious
deleted 9y ago
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deleted 9y ago
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samstave 9y ago
Didn’t the Winklevoss twins of Facebook fame buy like 20% of all bitcoin some time ago? What is their worth now? https://www.google.com/amp/s/amp.businessinsider.com/bitcoin-billionaires-winklevoss-twins-2017-12 https://www.google.com/amp/s/amp.businessinsider.com/bitcoin...
kjullien 9y ago
I don't think that this actually has any mid/long (even short depending on how you define that) lasting impact on the market. If you watch any pump and dump charts no matter how big the group is, you see that the price is exactly the same as before mere minutes after their little schemes... The only people who make money off of this are the ones that organize it and buy way before everyone else, or maybe a lucky few very fast buyers, but that's pretty much it. I'm pretty sure even people who try this don't do it more than once.

90 points by baxtr 9y ago

lixtra 9y ago

Would this go away with more regulation? Is it fraud?

pcwalton 9y ago
Pump and dump is absolutely fraud (as it requires deception to work--note the "promote on social media" step), and you can go to prison for it. Jordan Belfort, the "Wolf of Wall Street" mentioned in the title, did.
- lixtra 9y ago
  So how is it different from Bitcoin? Except for time scale? Is it the dump part?
  - pcwalton 9y ago
    Promoting investment in Bitcoin can (in theory) be legitimate if you sincerely believe that Bitcoin has real value. By contrast, pump and dump schemes involve lying about a security you know to be worthless (or at least worth far less than what you're saying). The fact that you dump it immediately makes it easy to prove this.
- spunker540 9y ago
  I think if these were regulated securities being traded on regulated exchanges it certainly would be fraud and a jailable offense. But is it fraud for something like collectible beanie babies? (as far as I can tell that is basically how cryptocurrencies are regulated right now in the US).
  - pcwalton 9y ago
    If you make money by getting groups together to sell Beanie Babies falsely claiming that you have insider info that the fad is going to make a comeback, that is fraud, and you can go to prison for it.
    - spunker540 9y ago
      So I couldn’t legally advertise alongside marked up collectibles that “the fad is coming back!” Or I just couldn’t legally collaborate with others to do so? I feel like it’s not necessarily a false claim, just a hopeful one. As a corollary every company in some respect uses spin to become who they are (you gotta fake it til you make it). Half a decade ago Tesla was making outlandish claims about their ambitions and they’ve not stuck to many of their commitments but no one accuses Elon Musk of fraud. He’s hopeful, not fraudulent.
      - acdha 9y ago
        In general it’s failing to disclose that gets you into trouble. Everyone knows that Elon Musk is not an unbiased source of information anout Tesla or their competitors because he doesn’t make any attempt to hide his investment.
    - jakear 9y ago
      How does this translate over to things like fashion/social trends in general? Something like "Corsets are coming back for spring 2018! Get on top of the trend at XYZ Fash Inc.!" hardly seems like fraud, but by that definition it would be.
      - pcwalton 9y ago
        This is where a lawyer would have to answer. I'm certain that a detailed explanation would involve a mountain of cases and precedents. (I would guess that a lot of the precedent hinges on whether you are intentionally lying, or whether you are merely making a good-faith prediction. Pump-and-dump schemes are obviously the former.) The point is that, in general, deception for financial gain is fraud, more or less by definition. It doesn't have to involve regulated securities.
erdo 9y ago
Thing about these telegram pump and dump groups is they are usually NOT lying to anyone. It's all very transparent (if you're inside the group) pump the price when we tell you to, and do what you want once the price has gone up (and it does go up).
AlexCoventry 9y ago
Existing regulations are probably as adequate as they are for more traditional instruments. There needs to be better monitoring and enforcement, though.

adamnemecek 9y ago

Can anyone recommend any good books on things like this? Idk what "this" really is lol. Black hat economics? I’ve setup a slack channel for crypto discussion because most groups and subreddits are too shilly and memey. https://hncrypto.slack.com/join/shared_invite/enQtMjk5MDg2MzAzMTIwLTEzNmU2NzVlNWFkMjNmZDI1ZGU1NzQ3MTZmNzM0NDU2OTc0Y2Y2NWMxZjBkZmI1MzMxMDllOGIzOTgwYWQ4MmU https://hncrypto.slack.com/join/shared_invite/enQtMjk5MDg2Mz...

qznc 9y ago
Here is a draft of a book: https://cryptofrenzy.wordpress.com/2014/02/19/wolong-writes-a-book/ https://cryptofrenzy.wordpress.com/2014/02/19/wolong-writes-... The author is allegedly the guy behind the Dogecoin pump 2013.
- samsonradu 9y ago
  Dogecoin actually managed to pull a pump-dump-pump? Its valuation looks quite good as we speak, even though I remember the dump (2015) [1] https://motherboard.vice.com/en_us/article/78xqxb/the-guy-who-ruined-dogecoin https://motherboard.vice.com/en_us/article/78xqxb/the-guy-wh...

wintom 9y ago

The real issue with all the pump and dump, fear of missing out, and all the other crazy “mooning” is that it is ruining this whole space. It is creating a reality that all the haters of cryptocurrency have been talking about for a while. Instead of focusing on building real applications with blockchain, programmable money, and changing the world everyone is focused on trading and get rich quick schemes. This stuff could change the world it is money ripped out of government hands and it could be baked into everything we do on the internet but I am not so sure that will happen anytime soon anymore. I am very jaded with the whole space because of all this fraud.

Sangermaine 9y ago
>It is creating a reality that all the haters of cryptocurrency have been talking about for a while. Or you might have it backwards: it's reality crashing against the near-religious fantasies that crypto boosters held for ideological and other reasons.
- Waterluvian 9y ago
  Yeah it feels like a real-time experiment on the necessity of regulation and oversight.
  - CryptoPunk 9y ago
    On the contrary, it shows how the market responds and evolves on its own without top-down enforcement. These pump and dumps will eventually stop being effective, because in a situation where information flows freely, and there are no backstops or gatekeepers to protect investors from their own gullibility, natural selection and other bottom-up adaptive processes go to work. You can even see the growing 'immunity' that investors have to these pump-and-dump schemes on cryptocurrency forums. People on the forums are much quicker to see through attempts at coordinated pumps now than even a few months ago. Letting things play out results in a more robust configuration than trying to guide the market from the top-down through the creation of powerful gatekeepers and laws that rob people of their agency.

jraines 9y ago

It's only legal if you wear a suit and do it on CNBC. This is my expert opinion as a super lawyer.

milofeynman 9y ago

What other kinds of fraud that has occurred in the past (stock market, real estate, etc) are people going to try with crypto? So far we've seen some big ones (pump-and-dump, and pyramid scheme).

Pmop 9y ago
Painting the tape.
buttcoinslol 9y ago
Wash trading: https://medium.com/@bitfinexed/wash-trading-bitcoin-how-bitfinex-benefits-from-fraudulent-trading-8bd66be73215 https://medium.com/@bitfinexed/wash-trading-bitcoin-how-bitf... Allegedly unbacked reserve currencies (tether): https://www.coindesk.com/tether-confirms-relationship-auditor-dissolved/ https://www.coindesk.com/tether-confirms-relationship-audito... I'm sure there are more, any scheme/scam that gives someone an edge will be tried in an unregulated market.

avenoir 9y ago

Just a week ago I saw a guy pump and dump a random altcoin live on Twitter just to prove his "haters" that he doesn't leave his followers holding a bag when he does his scheduled PnDs. The level of arrogance is really astounding. Hell, all of the biggest bitconnect scammers with a following on YouTube have already moved on to shilling other lending platforms instead of just disappearing. Interesting to see this unravel and how long it can continue.

Simon_says 9y ago

"You can't con an honest man."

Retra 9y ago
You're not saying very much here, but... If you're someone looking to get rich investing in cryptocurrency, it's worth considering where the money (not the 'value') actually comes from. People have to spend it, and you have to take it. If you don't care where it comes from, you may as well be stealing it.
- Simon_says 9y ago
  > If you're someone looking to get rich investing in cryptocurrency I'm not. I'm really really not.
  - Retra 9y ago
    I wasn't referring to you specifically.

KasianFranks 9y ago

Just like stocks http://investorshub.advfn.com http://investorshub.advfn.com

NicoJuicy 9y ago

Crypto seems to be a perfect example what I think big banks are doing in a "regulated space", eg. Downgrading all currencies except dollar, earning money on top of big clients ( pump scheme,... ) And etc.. It's just less obvious

deleted 9y ago

[deleted]

deleted 9y ago

[deleted]

samstave 9y ago

Didn’t the Winklevoss twins of Facebook fame buy like 20% of all bitcoin some time ago? What is their worth now? https://www.google.com/amp/s/amp.businessinsider.com/bitcoin-billionaires-winklevoss-twins-2017-12 https://www.google.com/amp/s/amp.businessinsider.com/bitcoin...

kjullien 9y ago

I don't think that this actually has any mid/long (even short depending on how you define that) lasting impact on the market. If you watch any pump and dump charts no matter how big the group is, you see that the price is exactly the same as before mere minutes after their little schemes... The only people who make money off of this are the ones that organize it and buy way before everyone else, or maybe a lucky few very fast buyers, but that's pretty much it. I'm pretty sure even people who try this don't do it more than once.