Web3 Pump-and-Dump Schemes Surge on Unregulated Crypto Market

Pump-and-dump schemes in the Web3 ecosystem have continued to exploit the unregulated and decentralized nature of the crypto market, manipulating token prices through coordinated buying and misleading information to lure investors before orchestrating mass sell-offs that leave tokens nearly worthless [1]. These schemes operate through a structured four-stage process, beginning with pre-launch hype, followed by a launch to attract attention, a price pump driven by misinformation or fake news, and finally a coordinated sell-off that triggers a sharp price drop [1].

The decentralized structure of Web3, combined with 24/7 trading and a lack of regulatory oversight, has created an environment particularly vulnerable to such manipulative tactics [1]. The anonymity of participants, often facilitated through privacy-focused communication channels like Telegram, makes it difficult for authorities to track or hold perpetrators accountable [1]. In 2024 alone, platforms like Pump.fun enabled the creation of over one million tokens, increasing the frequency of pump-and-dump opportunities [1]. Some schemes have reportedly generated returns of over 2,000% for orchestrators in a single event [1].

Recent enforcement actions have begun to close the gap, however. In October 2024, Operation Token Mirrors led to the seizure of $25 million and the charging of 18 individuals, marking a significant step in law enforcement’s ability to target these schemes [1]. Despite these efforts, the nature of the Web3 industry means that such scams remain challenging to eliminate entirely.

For investors, avoiding pump-and-dump schemes requires vigilance and due diligence. Unsolicited investment advice, especially from unknown sources on social media, should be treated with caution [1]. Additionally, investors should be skeptical of investment ads promising high returns and be wary of deepfakes used to falsely promote projects [1]. Conducting independent research on a project’s team, development history, and credibility is essential before committing funds. Diversifying investments can also help mitigate potential losses.

As the crypto market continues to evolve, so too do the tactics of those seeking to exploit it. While regulatory progress is being made, the onus remains on investors to remain informed and cautious in an industry still largely unregulated [1].

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