Crypto Investors Spent $4.6B in ‘Pump and Dump’ Tokens

In 2022, crypto investors poured up to $4.6 billion into crypto tokens that were allegedly involved in “pump and dump” tactics.

A report released on February 16 by the US blockchain analysis company Chainalysis claimed that over 9,900 tokens issued in 2022 on the Ethereum and BNB Smart Chain blockchains exhibited features of a “pump and dump” scheme. 

Chainalysis calculated that investors purchased these different possible fake tokens it detected using crypto worth $4.6 billion.

445 Crypto Organizations Involved

Notably, pump and dump is a type of securities fraud that requires boosting an existing stock’s price intentionally using false and deceptive positive claims in order to sell the shares that was acquired on the low cost at a greater cost. 

445 people or organizations, according to Chainalysis, are thought to be responsible for the alleged pump-and-dump tokens. The company states that “it’s possible, of course, that in some cases, teams involved with token launches did their best to form a healthy offering, and the subsequent drop in price was simply due to market forces.”

The firm revealed: 

“Teams launching new projects and tokens can remain anonymous, which makes it possible for serial offenders to carry out multiple pump and dump schemes.” 

A coin was deemed “worth analyzing” by Chainalysis as potentially a “pump and dump” if it had at least 10 swaps and four consecutive days of trade on decentralized exchanges (DEXs) in the week following its launch. 

About 40,500 of the 1.1 million new tokens introduced last year met the requirements. A price fall of 90% or more within the first week for a token from this category was considered likely to be a “pump and dump” by Chainalysis. Of the 40,500 tokens examined, the company discovered that 24% met the secondary condition.

In January of this year, Chainalysis also verified the transfer of funds taken by Blockchain Bandit, a cybergang well known for stealing digital assets from wallets with weak private keys.