In one word, it’s fraud.
What is Pump and Dump?
Pump and dump‘s goal is to quickly raise the value of a worthless cryptocurrency and then sell it to collect the gains from the price increase. What we call Pump and dump is a crime like stock market manipulation in many countries, including the United States, and is subject to punishment. Although the laws for crimes in the cryptocurrency world are not yet clear in Turkey, the penalties and definitions set by the CMB for stock market manipulation seem to fit pump and dump as well.
How does it work
In any pump and dump organization, the price of a worthless cryptocurrency (usually coins with low Sunday size) is artificially inflated through well-planned marketing. Lies, misleading statements, lots of social media posts and common signs are used to say that a worthless cryptocurrency is actually a hot buy that investors don’t want to miss (the pump).
To support these rhetoric, the price of worthless Coin is rapidly increased through a well-planned pump. Investors unaware of Pump and dump often start to hear news on social media about this worthless coin and see its price rise rapidly. So more investors start buying this worthless coin.
This is the moment when “outside” investors start buying, when the price goes through the roof, and the “dump” starts at that time. Those who organize Pump and dump profit by selling their worthless Coin at a very high price. As coin is sold, it hits bottom and reaches its true value. What happens is to pure investors who buy these worthless coins at a very high price.
Pre-Internet Era
It was much harder to organize such pump and dump manipulations before the internet. The organisers had to meet face-to-face or by phone. Those who watch Wolf of Wall Street know. Jordan Belfort worked at such a firm, calling investors over the phone and selling shares that had no value.
With the internet, things have become easier. Now people organize such manipulations by setting up groups on platforms like telegram, discord, WhatsApp.
The CFTC was the first government agency to become aware of such groups and their manipulations, regulating the Commodity, futures and options markets in the United States. In a statement they issued, they warned investors against pump and dump groups.
Victims will generally react to the rising prices of currencies or coins and will not confirm the rumours. Then the dump will start. Prices will fall and many people will be victims. These deceptions from start to finish can start and end in just a few minutes.”
My advice to you, please stay away from these rogue pump and dump groups. These are people who make money out of innocent people by manipulating them. Please don’t respond positively to calls from such groups and strike them in the face that they are crooks.
