“GM ser, free crypto signals for MVP to tell you wen moon. Hurry BTMFD now!”

by Edmund Yong

This article was first published by Smart Investor Magazine at the following link:

 

How to Avoid Being a Victim of a ‘Pump and Dump’ Price Scam? 

What is it like to be lured into a pump-and-dump scheme and being completely unaware until it’s too late? This is the firsthand experience shared by @Morbius91 who does not wish to disclose his identity. Certain details have been changed.

It began with one of the many digital asset trading webinars on Youtube. He ‘d struck a conversation with @Tokghoul who introduced him to a private chatgroup led by a self-proclaimed investment guru. Wanting to self-improve, he saw no harm in seeking financial education with similar peers and maybe cop some hot stock-picking tips from them. He clicked on the Telegram link to join.

“Welcome to the Club!”

The first few weeks were eye-opening. The members learnt and discussed technical analysis, which really impressed him. Before this he couldn’t tell apart ‘candles’ from ‘channels’. The members were diverse, with doctors and housewives. He even found out one of them was an oil rig engineer after he’d mistakenly posted a work document in the group.

He was informed that there were different tiers in the group, from beginner (L1) to advanced (L5), based on the qualifying amount set aside for investment. L1 starts with bitcoin while L5 deals with altcoins, where the “most exclusive” opportunities are. He was told the highest group is rarified and reserved for whales. Sensing his enthusiasm, @Tokghoul who was the group Admin invited him “as a favour” to join L5 on a trial basis. He felt flattered for being included. But in actual fact and little did he know, L5 was for dumb money or fresh meat. The Admin calls him “big brother” (大佬) at the front of house but “vegetable” (韭菜) behind his back.

The group discussion centred around the discovery of a little-known digital token with a new bleeding edge protocol that has strong breakout potential, supposedly. He didn’t understand what the protocol was about but didn’t want to look dumb as the newbie by asking uncool questions. All the whales were buzzing about it and have bought in, apparently. They would pool their funds together to trade in the same direction and save fees.

The token seemed pricey but the guru’s expectation was that it would run up further with a target upside of 20X. The Admin goaded him to invest and told him he’s lucky to have this chance which he mustn’t waste. There was an informal leaderboard to tally who the biggest winner in the group would be and plans for a lavish omakase dinner together. All girlfriends were welcome.

“What goes up fast will come down faster.”

As luck would have it, the token reached an all-time-high – for a few hours. But this was followed precipitously by a large sell-off, collapsing the token to mere pennies on the dollar. Investors lost everything and were left with fumes. They were gaslit and told to blame market forces. Those who vented their anger were quickly removed from the L5 group or demoted to L1, including @Morbius91 himself – as he no longer had the requisite investment amount.

He was crushed. After some time, he started to fit the pieces together. The so-called whales in the group were colluding together. They shored up large positions in the target token at a low price, and then rallied many others to buy it from the market at a high price (“pump”). The hype and timing were coordinated. Subsequently they offloaded their positions to make a nice profit for themselves (“dump”). But the others who went in at toppish levels lost their pants.

There was no easy way to say it: It felt like a scam. It was a scam!

He still held on to the tokens, but they are worthless. He wanted to find other victims and seek legal recourse. But first they needed to gather evidence that can establish the money trail and manipulative activity. He realized how there were no press mentions or corporate news on the token; no financial statements, annual reports or earnings guidance. It was a “shitcoin”. And he relied entirely on the “hopium” (a crypto slang for opium-like optimism) fed by the group.

“Any idiot can make money.”

The quote above is from the famous technopreneur and crypto investor John McAfee, who built a $100 million business empire selling anti-virus software. “Any idiot can make money. Keeping money, very few can do. The difficult thing in life is not making money, it’s keeping it.” A professional trader looks for consistent profits. But there is a thin redline that you shouldn’t cross: trading becomes gambling when it looks for quick profits, which can lead to quick losses.

Most do not know that McAfee was the first person to be charged by the US regulator CFTC (Commodities Futures Trading Commission) for a pump-and-dump scheme involving crypto. He secretly hoarded a token and touted it with public endorsements on social media to inflate the price, then dumped it back to the open market. The CFTC compared it to boiler room scams rampant in the 80s and 90s – these are old dogs using crypto as new tricks.

As for McAfee, he served prison time for tax evasion, and tragically hung himself to death by suicide. His net worth had dwindled to $4 million.

Edmund Yong is the managing partner of Celebrus Advisory and appointed by MDEC as part of its Talent Expert Network (formerly known as Digital Expert Panel) for blockchain technology. Members of the public with similar experiences and who are looking for investigative and forensic services in digital assets from authorised representatives, or to support their litigation efforts, can contact the CEO of Imperium Universe at jason@imperiumuniverse.xyz.