Cryptocurrency investors funneled up to $4.6 billion in tokens suspected of being part of “pump and dump” schemes in 2022.
A report on February 16 from blockchain analytics firm Chainalysis”analyzed all tokens released” in 2022 on the BNB Smart Chain and Ethereum blockchains and found that more than 9,900 exhibited characteristics of a “pump and dump” scheme.
A “pump and dump” scam typically involves the creators orchestrating a campaign of misleading claims, advertising hype and fear of being left out of something (FOMO) to persuade investors to buy tokens while secretly selling their stake in the scam at inflated prices.
Chainalysis calculates that investors spent $4.6 billion in cryptocurrency buying the more than 9,900 fraudulent tokens it identified.
It is suspected that The most prolific alleged “pump and dump” creator identified by Chainalysis, whose name was not disclosed, single-handedly launched 264 of these tokens last year:
“Teams launching new projects and tokens can remain anonymous, making it possible for serial criminals to carry out multiple pump and dump schemes.”
Chainalysis classified a token as “worth looking” as a potential “pump and dump” if it had a minimum of 10 trades and four consecutive days of trading on decentralized exchanges (DEXs) in the week after its launch. Of the 1.1 million new tokens launched last year, only more than 40,500 met these criteria.
If a token in this group experienced a first week price decline of 90% or more, Chainalysis considered it likely a pump and dump. The company found that 24% of the 40,500 tokens analyzed met the secondary criteria.
Chainalysis estimates that Only 445 people or groups are behind the alleged pump-and-dump tokens — suggesting that creators often launch multiple projects — and it says they made $30 million in total proceeds from the sale of their holdings.
“It is possible, of course, that in some cases the teams involved in the token launch did everything they could to form a healthy supply, and that the subsequent price drop was simply due to market forces,” the firm adds.
Despite the troubling statistics, in a separate report, The firm noted that revenue from cryptocurrency scams has nearly halved in 2022, largely due to depressed cryptocurrency prices.
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