Invite-only groups with membership fees are getting organized, acting together to pump the cryptocurrency prices high before dumping them in a matter of minutes and leaving clueless investors with big losses, according to Wall Street Journal.
These Pumpy-Dumpy organizations are waiting for a signal over chat groups to quickly start buying as much as they can. The chosen coin is not a coincidence; usually, a coin with a relatively small market cap is picked so it can be manipulated by brute force.
Participating investors are either a part of the organization or members of a chat group where they are “invited” after paying a fee to be able to get the signal.
WSJ gives the example of Cloakcoin, which was pumped a couple of times this year on the Binance exchange, allegedly Big Pump Signal were the culprits.
This year such groups managed to collectively acquire $825 million.
WHY IS IT IMPORTANT?
1. Pump and Dump schemes - are one of the oldest manipulations in financial markets: a group of people artificially inflate the price of an asset before "dropping" it at a profit.
2. The Securities and Exchange Commission (SEC) of the USA regularly discloses such cases on the stock market, however, in the cryptocurrency market, the situation is complicated by its non-transparency.