A Crypto pump consists of buying a lot of a particular coin to increase its demand and price. A crypto pump is often followed by a dump. It is therefore regarded as a fraudulent scheme "Crypto pump and Dump Scheme”.

Simply put, a pump-and-dump scam is a sort of fraud that involves perpetrators amassing a commodity over time. They inflate its price artificially by disseminating false information (pumping) and then selling what they have accumulated to unwary buyers at a higher price (dumping). Given that the price was fraudulently inflated, it usually declines, leaving purchasers who made their decision based on misinformation at a loss.

Online pump-and-dump operations are carried out by self-organized groups of people. The frauds are organized in plain sight on the Telegram or Discord servers for instant messaging or voice-over-internet protocol, allowing the free joining of people.

These groups always have structured members. Higher-ranking members get the notification of the intending pumps first by revealing the target coin a little sooner than lower-ranking users. As a result, the higher member has a better chance of getting a better deal and benefiting more from the pump-and-dump scam.

How do cryptocurrency pump and dump schemes work?

It is imperative to inform you that crypto pumping is a marketing strategy that could only be considered fraudulent if followed by a dump. Both crypto-pump and crypto-pump-and-dump schemes have the same underlying principle; the only difference lies in their intentions.

Crypto pump and dump schemes became more widespread last year as it became easier to create crypto tokens, celebrities' influence grew, and the number of people wanting to make rich quickly with crypto surged. Although a token like EthereumMax is only worth a fraction of a penny, these schemes entail hundreds of billions of coins being created, so any significant increase can result in the creation of millions of dollars, which is the pump. The coin's designers and promoters then sell billions of tokens, causing the price to plummet and leaving investors with worthless assets. Although this fraud is banned in assets such as stocks, there are currently no legal consequences for cryptocurrency pumps and dumps.

The internet's numerous pump-and-dump groups have varying levels of activity. Every day, the busiest perform at least a cycle. Less active groups might only carry out one operation every week. Other groups operate when they believe market conditions are favorable. So, is it possible to make money from the crypto pump and dump schemes?

There may be an opportunity to profit because a pump-and-dump strategy involves artificially increasing the value of a crypto asset immediately before a planned and unexpected drop. However, if you don't sell the unknown coins quickly enough, you'll be stuck with them for a long time.

Crypto pump usually happens when there isn't enough information available to crypto buyers.

Case studies

A typical example of a crypto pump and dump scheme is that of the Squid game token (SQUID), which saw its value skyrocket almost immediately after it went live. The makers of the Squid gaming cryptocurrency inflate their coins. Then they vanished, leaving behind $3 million in investor funds.

Another case in point is Kim Kardashian and Floyd Mayweather Jr. who artificially increased the price of EthereumMax. Following their activities, firm leaders pocketed the profits while leaving investors with useless cryptocurrency.

In January, investors filed a class-action complaint accusing Kardashian and Mayweather of involvement in the scheme.

Stages in a crypto pump-and-dump scheme

The stages highlighted here are the same for crypto pumping with the intent of promotion or advertising only and a crypto pump-and-dump scheme aimed at the fraudulent act. 

Below are the basic stages of a crypto pump and dump scheme

  • Basic information dissemination

The administrators convey the exchange that will be used, the exact start time of the operation, and whether the scheme will be FFA or Ranked. If it is open to the public, people with a VIP rank will receive the notice simultaneously or a few days or hours before the operation.

  • Announcement of the underlying coin's purpose

The notification is made more regularly as the operation's commencement date approaches.

When the pump starts, group members are told of the objective coin. Start time will be communicated based on your position in the hierarchy.

The crypto is generally printed in a purposefully obfuscated design that only humans can quickly decipher. The obfuscation prevents bots from understanding the message and launching market actions faster than humans.

  • Spreading the word to attract outside investment

Finally, market manipulation in cryptocurrencies occurs when the pump begins, and the admins send a tweet or share the news, requesting that everyone in the group spread the word that the crypto price is rising. Users promote their message via Twitter, forums, and specific chat rooms to create FOMO (Fear of Missing Out) of a wonderful investment opportunity and attract outside investors.

How do you recognize a cryptocurrency pump-and-dump scheme?

Because information on unknown coins is spread over Discord and Telegram channels, you may wish to inquire whether crypto pump-and-dump groups are legal. Pump-and-dump trading is banned in the stock market. But because most cryptocurrencies are not considered securities, cryptocurrency markets are usually legal ambiguity. As a result, while pump-and-dump crypto scams are morally and legally questionable, they may not violate any current laws. Nonetheless, authorized cryptocurrency exchanges consider such schemes to be illegal.

So, how do you know whether a cryptocurrency is a pump and dump? Understanding whether and how quickly someone may carry out a pump-and-dump strategy is critical for investor protection. Although there are no sure-fire symptoms of pump-and-dump crypto frauds, excessive enthusiasm surrounding a project or its token can be a red flag. As a result, before making educated investment decisions, investors should constantly assess cryptocurrency projects.

If the project has no defined objective, claims unrealistic benefits, lacks a well-thought-out development path, or is affiliated with past bad actors, these are all red signs.

Another significant red signal is if the people you follow start talking about cryptocurrencies suddenly.

Another sign of a pump-and-dump strategy is a sudden and parabolic increase in the price of a cryptocurrency. This is especially important if the cryptocurrency was previously ignored, unrecognized, or forgotten. Furthermore, if you hear a well-known person discuss a cryptocurrency, analyze their intentions. Many influencers and celebrities are unfamiliar with cryptocurrencies; nevertheless, if paid to do so, they will simply endorse them (even if they are scams).

As a result, one should be aware of such approaches before investing in future unknown crypto ventures. So, how can cryptocurrency investors avoid pump-and-dump scams? Choosing and sticking to a strategy are critical components of trading or investing.


A Crypto pump in itself could be a crypto marketing strategy and almost follows the same activities as seen with a crypto pump-and-dump scheme, which is a fraudulent act. Identifying them is not an easy task to do. It requires enough research and sticking to a strategy.

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