Menu Close

Crypto Investors Lose Billions in ‘Pump and Dump’ Scam

• Cryptocurrency investors spent up to $4.6 billion on tokens suspected of being part of “pump and dump” schemes in 2022.
• These tokens were launched on the BNB Smart Chain and Ethereum blockchains.
• One unnamed individual is suspected to have single-handedly launched 264 such tokens.

Crypto Investors Invested Billions in “Pump & Dump” Tokens

Cryptocurrency investors funneled as much as $4.6 billion into crypto tokens suspected to be part of “pump and dump” schemes in 2022, according to a report from blockchain analytics firm Chainalysis. The report analyzed all tokens launched on the BNB Smart Chain and Ethereum blockchains last year and found that over 9,900 bore characteristics of a “pump and dump” scheme.

What is a Pump & Dump Scheme?

A pump-and-dump scheme typically involves the creators orchestrating a campaign of misleading statements, hype, and Fear Of Missing Out (FOMO) to persuade investors into purchasing tokens while secretly selling their stake in the scheme at inflated prices.

Suspected Fraudulent Tokens

Chainalysis estimated investors spent $4.6 billion worth of crypto buying the nearly more than 9,900 different suspected fraudulent tokens it identified. The most prolific purported pump and dump creator Chainalysis identified — who was not named — is suspected of single-handedly launching 264 such tokens last year. Teams launching new projects and tokens can remain anonymous, which makes it possible for serial offenders to carry out multiple pump and dump schemes undetected by authorities or regulators.

Crypto Regulations Needed

This incident highlights the need for regulations with regards to token launches — something which has been discussed heavily by industry leaders in recent times but has yet to gain traction due its complexity within various jurisdictions around the world. Without clear regulatory frameworks governing these activities, they are likely to continue unchecked further exposing retail investors who may be unaware they are participating in risky investment strategies like pump-and-dumps.