Pump-and-Dump Schemes Skyrocket 2000% Returns in Web3 Market

Coordinated pump-and-dump schemes have long plagued the Web3 ecosystem and the broader crypto market, exploiting the decentralized and largely unregulated nature of digital asset trading. These manipulative tactics involve orchestrators artificially inflating the price of low-value tokens through coordinated buying and misleading information, only to sell off their holdings at the peak, leaving other investors with devalued or worthless assets [1]. The process typically follows four distinct stages: pre-launch hype, launch and promotion, price pumping via false narratives or deepfakes, and a synchronized sell-off that collapses the token’s value [1].

Web3’s decentralized structure, 24/7 trading, and the ease of token creation on platforms like Pump.fun have made it an attractive environment for these schemes. In 2024 alone, over one million tokens were launched, increasing the risk of manipulation [1]. Schemers often operate with anonymity, using encrypted communication channels to avoid detection. Law enforcement has historically struggled to hold them accountable, although recent actions such as Operation Token Mirrors in October 2024—where $25 million was seized and 18 individuals were charged—signal growing regulatory scrutiny [1].

Pump-and-dump operators typically reap profits of over 100%, with some cases seeing returns as high as 2,000% in a single event [1]. According to a study by the University of Bristol, some tokens are targeted multiple times, with one asset falling victim to 98 separate attacks over a four-year period [1]. The use of deepfakes and fake news further complicates the detection of these schemes, as they can mimic trusted sources or high-profile figures to mislead investors.

To avoid falling victim to pump-and-dump schemes, investors are advised to exercise caution with unsolicited investment advice from unknown sources, especially on social media platforms. They should also be skeptical of promises of unrealistic returns and conduct thorough research on any project before investing [1]. Diversifying investments and avoiding high-risk opportunities that demand immediate action can also help mitigate potential losses.

As the crypto industry continues to evolve, so too do the tactics of bad actors. While regulatory efforts are improving, the decentralized and global nature of the space means that vigilance and due diligence remain essential for investors navigating the Web3 landscape [1].

Source: [1] How fake news and deepfakes power the latest crypto pump-and-dump scams (https://coinmarketcap.com/community/articles/6890f9d9db840933c477ae9f/)