Pump-and-Dump Groups Become ‘Widespread’ as Market Remains Largely Unregulated

[MOProgress]

The Social Science Research Network (SSRN) recently published research studying the phenomenon of pump-and-dump groups within the crypto community. The paper — conducted by seven academics from Tel Aviv University, the University of Tulsa and the University of Mexico — concluded that “regulators should be very concerned that price manipulation via pump and dump schemes is so widespread.”
What is a pump-and-dump scheme?
A pump-and-dump scheme is a type of price manipulation where a group of traders aim to drive an asset’s price up through coordinated buying. Once outside investors notice the surge in price, the insider group starts selling the positions they previously acquired at lower prices, thus making a profit.
It is important to stress that pump-and-dump schemes are illegal and considered securities fraud by the United States Seсcurities and Exchange Commission (SEC).
SSRN study: Pump-and-dumps are ‘widespread’ on Telegram and Discord
The SSRN study focused on the scope of pump-and-dumps schemes involving cryptocurrencies. During their research, the academics established that such insider groups are usually organized through two messaging apps popular within the crypto community: Telegram and Discord. “These platforms are the main outlets for pump and dump schemes,” the paper argues.
Specifically, after collecting “as many pump signals as possible from all channels in these platforms,” the researchers located 1,051 and 3,767 pump-and-dumps schemes on Discord and Telegram respectively, which were operating for almost six months, from mid-January 2018 to early July 2018.
There were three different types of pump-and-dump channels, the paper notes: “obvious pumps,” “target pumps” and “copied pumps.”

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