Hundreds of millions of people invest in cryptocurrencies. That’s a big audience for scammers to target, so it’s no surprise that the crypto world is, unfortunately, rife with malicious tricks and schemes, like the famous “pump and dump” scam technique.
This guide looks at how pump and dump crypto scams work and how to spot them so you don’t become a victim.
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How Do Pump and Dump Crypto Scams Work?
A pump and dump scam is when one or more scammers contrive to artificially inflate the price of a cryptocurrency token or other digital asset. They invest in a large amount of the asset to push the price higher and then use various techniques – like aggressive marketing campaigns or spreading fake and exaggerated claims on social media sites – to attract attention and investors.
Then, once the price has reached a certain point, the scammers simply cash out, selling off their portion of the asset to buyers. Since they held so much of it in the first place, the value suddenly plummets after their sale.
In the aftermath, all the victims who were fooled by the scammers are left with an often near-worthless asset and possibly major losses in their own financial portfolios. It’s a very common scam technique and it works primarily on the principle of FOMO or “Fear of Missing Out” – the scammers make people think they need to invest or they’ll be missing out on a major money-making opportunity.
Signs of Pump and Dump Crypto Scams
Sign 1. Too Good to Be True Claims
A lot of pump and dump scams rely on claims that are exaggerated or too good to be true to try and create that “FOMO” feeling among the audience. The scammers might claim that their coin or asset is set to become “the next Bitcoin,” for example, or that its price is due to rise by hundreds or even thousands of percentage points by the end of the year, promising huge returns for any investors.
Sign 2. Sudden or Unrealistic Price Spikes and High Trading Volume
In this popular scheme, a scammer, or more usually a group or network of scammers, will first buy up large amounts of an asset to drive its price up. You can usually identify this by checking the price trends and charts of the asset in question. It might have had low value or activity for months, and then suddenly skyrockets, with tons of investment out of the blue.
Sign 3. Generic Articles or Social Media Posts Hyping Up a Particular Asset
To get people investing in their assets, pump and dump scammers often create blogs, articles, or social media posts about them. They sometimes even use AI to write these articles – much of the language can read as generic or repetitive. It may make unrealistic claims, saying that one particular asset is about to have a huge rise in value, without any clear explanation of why.
Sign 4. Low Market Capitalization
Another warning sign to watch for is low market capitalization, which refers to the total value of the asset or token in question. Pump and dump scams almost always focus on coins with low capitalization, because their prices are much easier to manipulate. That doesn’t mean all coins with low capitalization are scams, but you should be wary about investing in them.
Sign 5. Lack of Transparency or Logic
Lastly, perhaps one of the most obvious signs of a pump and dump scam is when there’s very little transparency or documentation behind a cryptocurrency or asset. You may not be able to tell exactly what the cryptocurrency is, who created it, what it’s used for, or why it would suddenly experience such a price surge. Scammers keep all of this information vague and inaccessible so users have a harder time separating scams from real investments.
How to Protect Yourself From Pump and Dump Scams
- Be very cautious when investing in any kind of crypto or digital assets.
- Be wary of coins or crypto projects you’ve never heard of or can find little info about.
- Look at the price and trade history of coins to spot spikes or unusual activity.
- Don’t trust random articles or social posts that seem to be inexplicably hyping up one particular cryptocurrency.
- Don’t fall victim to FOMO.
Report the Scam
You can report pump and dumps or other crypto scams to the authorities including:
- Report to the FTC
- Report to the FBI Internet Complaints Center
How to Protect Yourself More
Sign up for Scam Detector’s scam alerts to find out about new scams as they emerge.
If you subscribe, we’ll also send you regular messages with warnings of new scam techniques, explanations of different types of scams, and valuable tips to stay safe.
Read more about other kinds of crypto scams, like Bitcoin scams so you know how to avoid them.
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When my sweet old grandmother got caught up in an Amazon gift card scam, I decided then and there that I needed to do whatever I could to inform as many people as possible about the grifters of the world. That’s what I do here – writing about modern scams so you don’t get caught out.
This is ment as a warning to new potential crypto currency investors, looking for an appropriate platform for investing in e.g. Bitcoins or other crypto currencies.
I’m just an ordinary Danish male of 72 years.
Personally I felt curious last year about crypto currencies, and how that market works, and looked for people who knew something about how to enter the market, and how to act in it.
Coincidently I happened to talk with a young American lady, (naming herself Kareen Confidence), in a social media on the Internet, living in Florida, and working as a financial advisor, specialized in crypto currencies.
After lots of mailing over some months, she suggested to help me open an account where I could make savings in Bitcoins, with a significant higher interest rate than any bank account would provide me. And I could randomly choose the amount to spend every month, and I was free to withdraw my money anytime. It all sounded good to me.
Coincidently, she told me, she had been offered the opportunity to let me make my savings on a site which her company regularly worked together with: Topgainbit.com, a relative new company, but who offered significant higher returns than other sites.
Really a bargain according to her, and I was still free to decide how much I would like to pay per month. The company’s site had no written manual or description of what to do when, or how much you could earn, or how to withdraw your money again. Only that it was an easy way to enter the Crypto market. Nothing concrete on their website, and no real ratings on the Currency-fora’s because it was a relative new platform, who had only existed a year or so at that time.
But I was confident with my specialized contact, and she promised me to be my guide, and assist me every time I wanted to invest my $ and exchanged them to Bitcoins. She appeared to be very familiar with the Topgainbit.com platform, she even told me she also had her own private account there.
As most new investors I started at Basic level, and the business case holds 3 levels: Basic Plan, Classic Plan, and Executive Plan. And the more investment you make, or as your balance develops, the higher you will be ranked. After just seeing my balance grow slowly I was invited to re-invest my balance, and reinvesting for 24 hours added 4% interest rate to your balance. And you can do it every day, 4% + 4% of 104% + + + it quickly piles up.
But when you get to a certain balance, (around $8,700, (in my case) you are told to update your account to a higher level. This means you have to make a mandatory deposit of $510 in my case. (Others may be different) which are added to your balance together with a bonus of some $$1,240 bitcoins.
That was when I became suspicious, so I wanted to withdraw my money, before the update, but that was not allowed.
To prepare for the withdraw, I was then asked to pay yet, another mandatory, Maintenance Fee, of $1,240 bitcoins. This refundable deposit, which would be added to the balance together with a Reward (bonus) of $10,530 (bitcoin), had to be deposited within 10 working days.
And after that I could withdraw my whole balance….
This is “the final charge” before my withdraw, confirmed by my “guide miss “Confidence” AND the company Help Desk.
BUT this Maintenance bonus must be activated first, so I needed to pay $200 to activate the Maintenance bonus, AND I could not start to withdraw before this investment was done.
Well that was deposited too, and then I had a new “confirmation” from my “guide” AND from Help Desk: This is the FINAL REQUEST.
Now you can start to withdraw your whole balance (which had now reached $65,720 (bitcoin)) they both wrote independently to me.
– WAOU!! From $8,700 to $65,720 – what a fortune – in just 8 months – yeah actually, in just the last 2 months, from when I started the withdraw process. It seems so unrealistic to me….
BUT my account now appears to be a (UTA) Unified Trading Account – whatever that is. And to withdraw from such account, you have to pay an UTA upgrade of $1,755.
A sum that I guess are related to the balance, which of course has been artificially expanded due to all these ‘fake’ bonuses. The UTA upgrade was due to be paid within 3 days.
This is (again) the FINAL REQUEST I am told again from miss “unConfidence” AND from the company Help Desk, but I recall having heard likely before.
I decided to leave it – and not to pay this last request. I expect my investment may be lost.
It ended up in a total investment of approx. $5,000. But it was only around $3,000 when I first decided to withdraw. The $2,000 has been added, just to be able to withdraw my money and close down my account.
After the expiration of the due date for paying the UTA-upgrade, my account was restricted, which I asked for an explanation for. Please see the screen dumps below, and you will see, that just like there are no specific way the company runs an account, there are also no specific way of handling the Restricted UTA-accounts. It much depends on what the administration thinks on the day – as I read it. Like selling elastics by the meter.