The practice is unethical, yet not illegal per the SEC. Cryptocurrency scammers have found a way to make a quick profit through social media platforms like Twitter and Telegram, using the pump and dump method. In short: they buy coins when the price is low, team up to create the buzz and get the price of this coin to rise, then sell theirs for a profit.
Researchers at USC’s Information Sciences Institute (ISI) have conducted a study to track and shut down this phenomenon.
Mehrnoosh Mirtaheri, graduate research assistant at ISI who led this work, started to analyze tweets related to the stock market – where pump and dump operations are illegal – then shifted her focus to cryptocurrencies. “These coins are not regulated at all, there is no control, so a lot of people try to manipulate the price by using social media to create false hype about them,” Mirtaheri said, adding that she saw an opportunity to raise awareness about this questionable practice.
The modus operandi is always the same.
“The attack starts with a group of people buying a specific coin, then they send messages to Telegram channels to make a bigger group aware of the pump and dump operation, with the instructions to buy then to sell when it reaches a specific price,” she said. “They all buy the coin, create enthusiasm about it, the price goes up, then they all dump the coin at the same time, making money off of it: the delta between the…
