The Rise of Cryptocurrency Scams

Photo by Bermix Studio from Unsplash.

Not a lot of people knew what cryptocurrency was five or ten years ago, but now, anyone and everyone seem to have either gotten into it or are looking to get into it. Most people seem to be treating it like stocks, which means that they end up buying different cryptocurrencies in hopes that they will go up in value as Bitcoin did, and that makes sense. Bitcoin has gone up in value from $327 in 2015 to around $36,000 now, which may not be the highest value that Bitcoin reached, but it is a testament to what the possibilities are with cryptocurrencies. Knowing that, it makes sense that there are a lot of people wanting to get rich off of cryptocurrencies. But as always, if it is too good to be true, it probably is not true. And when the prize is getting rich quick, there are bound to be people willing to make money off of other people’s hopes, dreams, and more specifically their money.

Scams, particularly scams involving cryptocurrency, are nothing new. Every day, people seem to be coming up with more and more creative ways to scam people. For example, the Federal Trade Commission put out a warning a month ago explaining how a scam involved convincing unsuspecting people via phone calls, to buy crypto and then transfer the money to the caller. At this point in time, it is basically the latest form in the evolution of the tech support/online dating/fake prize scam calls, and a majority of people know to steer clear of them. But those are not the only type of scam to be wary of, as there are many other creative ways to lose money to scammers. One version of a cryptocurrency scam seems to be making the rounds of social media through influencers and questionable DMs; this is the pump-and-dump scam. 

A pump and dump scheme is a scam that got its start in the stock market, meaning that those who have seen “The Wolf of Wall Street” will be seeing something familiar. The scam works by artificially hyping up a cryptocurrency through any means possible, including hyping it up on social media, with a good example of that being through social media influencers with millions of fans. These influencers market a new cryptocurrency by making extravagant promises to their usually cryptocurrency-illiterate fans. That in turn leads to the price of the cryptocurrency in question being driven up, which is when the “dump” part of the scam comes in. Those who owned the cryptocurrency before the price was artificially driven up will then be able to sell their cryptocurrency for far more than what they bought it for. That then makes the value of the cryptocurrency in question drop to what it was before the hype, which means that those people who bought it because of social media hype have just lost their money. Meanwhile, the influencers and creators who hyped up the cryptocurrency walk out with far more money than what they started with, which in 2021 scammed $2.8 billion dollars out of investors. But that isn’t the most brazen pump-and-dump scam on social media.

Recently, people have been invited to join various Discord or Telegram groups meant to “share financial advice,” but in reality are places for groups of individuals to pump various cryptocurrencies and sell them off once the price is artificially inflated. The scam seems to capitalize on the high-profile social media influencer pump-and-dump scams that have made the news by promising people that they can get a piece of the action. The people who join those groups are usually instructed to have the money ready to buy a certain cryptocurrency at a certain time, with the idea being that those who buy the fastest, will make the most money. Once that time hits, people would be able to pump up the value of the cryptocurrency and then sell it once the value becomes higher. The invitations usually involve promises of making enough money to have a lavish lifestyle, like the organizer of the group. If one looked at the social media pages of the organizer, it would seem to be too good to be true; which means it definitely is. The only people who stand to make money through pumping cryptocurrency are the people who organized the cryptocurrency in question.

Behind the scenes, the organizer of the group would have gotten a large amount of the cryptocurrency being pumped, so when the members of the group went to buy the cryptocurrency in question, they could sell at the exact same time. Since the cryptocurrency was being bought by many people, its price would go up. Whoever sold their cryptocurrency at the time of the “pump” would make a lot of money, while the people “pumping” the cryptocurrency would lose a majority, if not all, of their money. This particular scam is ingenious because nobody wants to admit that they got scammed while trying to commit a crime, since after all, pumping and dumping is illegal. At the end of the day, scams will never go away, but the best way to avoid getting scammed is to just ignore anyone who promises wealth and fortune if you just “invest a little bit of money,” since if it’s too good to be true, it probably is.