Whales of the Wild West: Influencer Pump-and-Dump Crypto Scams
The world of cryptocurrencies, NFTs, and Blockchains overall is the wild west of the internet. Barely regulated, fraught with fraudsters, and brimming with scammers, it is up to the individual to tread carefully and only connect their wallets to what they trust. Still, trust can be abused as famous influencers use their platform and their status to take part in pump-and-dump crypto scams that their unwitting, naïve, or well-meaning followers lose their investments.
Pumping up the price of a coin or NFT and then selling all its holdings at the peak price causes the coin to dip in value to near worthlessness. Fans, buyers, and followers of said influencer are left holding a worthless token commonly referred to as a “shitcoin” by the crypto community.
It is worth noting that not all pump-an-dumps are rug pulls, but all rug-pulls are pump-and-dumps. A rug-pull generally takes the token off the market, with the creators disappearing without a trace.
Pump-and-dumps, on the other hand can be done by any investor with enough money to make a difference. They find a token that s worth very little with a low market cap, buy into it with a large sum, and when people see the value rising rapidly, they jump aboard.
Some ride the upward trend for a short time and sell for a small profit; others hold, or HODL in crypto terms, for the long haul.
Some influencers are simply accepting payment, sometimes in the form of the token itself, to promote what seems to be a perfectly honest project to their many followers and even to themselves, and so it is not always clear cut when an influencer is scamming or just taking part in the market.
The result is the same: Whales make it big, and the guppies take the plunge.
There are several famous instances of blatant pump-and-dump schemes and other suspected ones. Here are some notable pump-and-dump crypto scams with influencers involved:
Save the Kids Token
Save the kids token is a coin that was touted by a group f YouTube influencers to be a cryptocurrency with a cause, only for those same influencers to dip out and sell their holdings almost directly after the launch.
Even as the influencers had played the victim and claimed that they had never intended to pump-and-dump the project. Some investigations by suspicious YouTubers revealed a very different story.
After tracing their wallets’ activity, which is fully transparent on the blockchain, it showed that the head of the project sold their entire supply just minutes after the token erupted in price.
The project attempted to reassure its fans that the supposed “anti-whale mechanism” would guarantee that the project was not a scam. These mechanisms basically kept any single wallet from selling a large number of its holdings in a short time.
It only took a small change in the code by the developers to nullify those protections, and the dumping commenced. There was no doubt that this was a premeditated pump-and-dump.
Gary Vi and the Crypto Punks
Crypto Punks is a famous NFT (Non-Fungible-Token) project that was subject to a major pump-and-dump when several YouTube influencers all bought the NFT at once, shared this news to all their fans who quickly followed suit, and just as the price of the NFT was at its highest, sold their holdings for a fortune.
Shepherded by Gary Vi, a well know financial and motivational speaker with a massive loyal following, YouTube influencers like Jake Paul and others
What happened, as revealed in a podcast involving Logan Paul, was basically market manipulation. If this had happened in the stock market, law enforcement would have descended with a vengeance, but as we stated, the crypto sphere is still a wild and untamed place.
The Elon Musk Dilemma
While most influencer scammers target altcoins, lesser-known alternative tokens with very little volume, as their main squeeze, mega influencers such as Elon Musk have been accused of pumping and dumping major cryptocurrencies with huge volumes like Bitcoin and Ethereum. While accepting the currency as payment for products in your own company is hardly a scam, some suspect that his change of mind after the price of Bitcoin had risen was a sign of foul play. His company, Tesla, however, does own over 43,200 Bitcoins.
Now, these are suspicions with no legal backing or proof. The mere mention of Elon Musk alongside a coin of any kind is enough to double its value. Such is the effect of massive social influence. Take Dogecoin as an example. The price rise in Dogecoin made many suspects that it was a ploy to raise funds for his company.
Musk’s response to these accusations was, “I pump, but I don’t dump,” and it does seem like he intends to take these tokens with him into future business ventures.
The saddest and most sadistic thing about these pump-and-dump crypto scams, when intentional, is that the people who end up losing their money are the people who can least afford it and bet heavily on the success of a project to bolster their finances. This is bad practice overall, as one should never put all their eggs in one basket, especially in a basket as volatile as the crypto world.
By abusing the trust and naivety of their fans, malicious actors can make large gains on the losses of others.
In the height of the blockchain, cryptocurrency, and NFT hype, many thought that the barrier to entry for creating a token and marketing it up to a significant level was too high for anyone to take part.
Now, the crypto community knows better. Behind all the technical words and complicated explanations, in truth, it is too easy to create a coin out of nothing and manipulate public opinion to pump up the price.
One word, freelancers – be it on Fiverr, Upwork, and Freelancer. With a few hundred dollars and some patience, you can create a cryptocurrency, market it through various publications, create a legitimate-looking website, team up with influencers to promote your project, and jump ship with your winnings, leaving the rest of the investors’ money to sink.
Now the spotlight is on, and people, at least many more people, know better and are getting better at spotting red flags and possible scams more accurately.
Summary
The cryptocurrency space is the wild west of the internet, barely regulated and full of scammers preying on the eager and naïve. This has attracted the attention of morally corrupt influences to use their reach for nefarious market manipulation schemes called pump-and-dumps to multiply their earnings in a flash, leaving smaller investors with worthless digital junk.
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