Crypto investors spent $4.6B buying 'pump and dump' tokens last year

Cryptocurrency investors funneled arsenic overmuch arsenic $4.6 cardinal into crypto tokens suspected to beryllium portion of “pump and dump” schemes successful 2022.

A Feb. 16 report from blockchain analytics steadfast Chainalysis “analyzed each tokens launched” successful 2022 connected the BNB and Ethereum blockchains and recovered conscionable implicit 9,900 bore characteristics of a "pump and dump" scheme.

A pump-and-dump scheme typically involves the creators orchestrating a run of misleading statements, hype, and Fear Of Missing Out (FOMO) to transportation investors into purchasing tokens portion secretly selling their involvement successful the strategy astatine inflated prices.

Chainalysis estimated investors spent $4.6 cardinal worthy of crypto buying the astir much than 9,900 antithetic suspected fraudulent tokens it identified.

The astir prolific purported pump and dump creator Chainalysis identified — who was not named — is suspected of single-handedly launching 264 specified tokens past year, with the steadfast explaining:

“Teams launching caller projects and tokens tin stay anonymous, which makes it imaginable for serial offenders to transportation retired aggregate pump and dump schemes.”

Chainalysis classified a token arsenic being “worth analyzing” arsenic a imaginable "pump and dump" if it had a minimum of 10 swaps and 4 back-to-back days of trading connected decentralized exchanges (DEXs) successful the week aft its launch. Of the 1.1 cardinal caller tokens launched past year, lone implicit 40,500 acceptable the criteria.

If a token from this radical saw a terms diminution successful the archetypal week of 90% oregon greater Chainalysis deemed it apt the token was a "pump and dump." The steadfast recovered that 24% of the 40,500 tokens analyzed acceptable the secondary criterion.

A array showing the analytic breakdown and fig of tokens purported to beryllium fraudulent. Source: Chainalysis

Chainalysis estimated that lone 445 individuals oregon groups are down the suspected pump-and-dump tokens — suggesting creators often motorboat aggregate projects — and made $30 cardinal successful full profits from selling their holdings.

Related: Navigating the satellite of crypto: Tips for avoiding scams

“It’s possible, of course, that successful immoderate cases, teams progressive with token launches did their champion to signifier a steadfast offering, and the consequent driblet successful terms was simply owed to marketplace forces,” the steadfast added.

Despite the concerning statistics, successful a abstracted report, the steadfast noted revenues from crypto scams were chopped astir fractional successful 2022 mostly owed to depressed crypto prices.