"Quarter of Crypto Tokens Linked to Pump-and-Dump"

Security researchers at Chainalysis have discovered that almost a quarter (24%) of cryptocurrency tokens launched last year displayed the tell-tale signs of a pump-and-dump fraud scheme.  Pump-and-dump schemes are common in traditional finance.  Fraudsters typically promote assets they hold stocks in to other investors, rapidly driving up the price.  When it reaches a certain point, they sell the over-valued shares at a profit, causing the price to plummet.  The researchers noted that crypto tokens, tradeable digital assets built on another cryptocurrency's blockchain, are increasingly popular among the same scammers.  The researchers explained that "this is largely due to the relative ease with which bad actors can launch a new token and establish an artificially high price and market capitalization for it 'on paper' by seeding the initial trade volume and controlling the circulating supply."  The researchers noted that, additionally, teams launching new projects and tokens can remain anonymous, which makes it possible for serial offenders to carry out multiple pump-and-dump schemes.  Chainalysis looked at the 1.1 million tokens launched last year on the Ethereum and BNB blockchains.  Of the 40,521 tokens that did gain traction, 9902 (24%) saw a 90% price drop in the first week after launch, singling them out as pump-and-dump scams.  The researchers stated that it seems like the same fraudsters were responsible for multiple scams last year.  The most prolific individual launched 264 suspect tokens in 2022.  The researchers said that in total, buyers not believed to be associated with the tokens' creators spent a total of $4.6bn worth of cryptocurrency acquiring some of the 9902 suspected pump-and-dump tokens they identified.  The researchers estimate that the creators of these tokens made a total of $30m in profits from selling off their holdings before the tokens' value plummeted.

Infosecurity reports: "Quarter of Crypto Tokens Linked to Pump-and-Dump"