It’s the oldest scheme in the book, but it still works
The CFTC is out with a warning about pump-and-dump schemes in cryptocurrencies.
People promoting stocks and then dumping them have been around as long as stock markets. It’s the premise of The Wolf of Wall Street and the birth of the internet added an entire layer.
It’s an industry unto itself in penny stocks and regulators have a tough time stopping it. Crypto is a new playing field with plenty of new, unsophisticated traders, so it’s now surprise that it’s proliferating.
One spot is Telegram, which is extremely popular in crypto, something the CFTC alludes at in hinting at ‘mobile chat apps’ as a problem.
What’s new here is how quickly the schemes are taking place.
From the CFTC:
“The organizers of the scheme will commonly spread rumors and urge immediate buying. Victims will commonly react to the currency’s or token’s rising prices, and not verify the rumors. Then the dump begins. The price falls and victims are left with currency or tokens that are worth much less than what they expected. From beginning to end, these scams can be over in just a few minutes.”
My advice is never to take tips from anyone. Not me, not family, not Warren Buffett. My other advice would be to be very careful about news sources. A sophisticated way to pump-and-dump is fake news on cloned websites. Be sure to double check the URLs.