In 2022, crypto investors invested as much as $4.6 billion in crypto tokens, allegedly part of “pump and dump” schemes.
February 16 report from blockchain analytics company Chainalysis “analyzed all tokens launched” in 2022 on the BNB and Ethereum blockchains and found just over 9,900 characteristics of the “pump and dump” scheme.
The pump-and-dump scheme typically involves creators orchestrating a misleading, hype, and fear of missing out (FOMO) campaign to persuade investors to buy tokens by secretly selling their stake in the scheme at inflated prices.
Chainalysis estimates that investors have spent $4.6 billion worth of cryptocurrencies to purchase nearly 9,900 different tokens suspected of being fraudulent.
The most prolific alleged pump and dump creator identified by Chainalysis — who has not been named — is suspected of single-handedly launching 264 such tokens last year, with the firm explaining:
“Teams launching new projects and tokens can remain anonymous, allowing serial criminals to perform multiple pump-and-dump schemes.”
Chainalysis classified a token as “worthy of analysis” as a potential “pump and dump” if it had a minimum of 10 swaps and four consecutive days of trading on decentralized exchanges (DEXs) within a week of its launch. Of the 1.1 million new tokens issued last year, only over 40,500 qualify.
If the price of a token in this group declined by 90% or more in the first week, Chainalysis judged that the token was most likely a “pump and dump.” The firm found that 24% of the 40,500 tokens analyzed met the secondary criterion.
Chainalysis estimates that only 445 individuals or groups are behind the suspected pump-and-dump tokens – assuming the creators often launch multiple projects – and made a total profit of $30 million from the sale of their assets.
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“It is possible, of course, that in some cases the teams involved in the launch of the tokens did their best to form a healthy supply and the subsequent price drop was simply due to market forces,” the firm added.
Despite the troubling statistics, in a separate report, the firm noted that cryptocurrency fraud revenues have shrunk by almost half in 2022, largely due to declining cryptocurrency prices.
Credit : cointelegraph.com
