New Report Exposes Dark Side of Crypto Industry: Countless Pump-and-Dump Scams
Last year, roughly a fourth of the 40,521 new cryptocurrency tokens launched were part of pump-and-dump scams, according to a new report by Chainalysis cited by the South China Morning Post. The report revealed that 9,902 of these tokens experienced significant price drops within their first week, generating over $30 million in profits for their creators.
The illicit scheme involves artificially increasing the price of a token before selling, leading to sharp price declines and causing significant losses for other buyers. Such scams are on the rise in the crypto industry given the anonymous nature of digital assets.
Regulators around the world are struggling to protect consumers as such fraudulent activities become more prevalent.
Last year, investors in Hong Kong fell for a similar scheme known as a “rug pull”: non-fungible token (NFT) projects vanished after heavy promotion.
The SEC recently ordered Kraken to shut down its offerings in the U.S. and proposed new rules to restrict how asset managers invest customer funds in cryptocurrencies. Similarly, the U.K. has strengthened its oversight by pledging to regulate a broad range of crypto asset activities.
Hong Kong has recently moved to restrict retail trades to only the safest coins. With the introduction of new regulations, local regulators are attempting to put up a mighty fortress to shield investors against the treacherous crypto seas that are apparently full of scam coins.
Meanwhile, in other corners of the globe, countries like the United Arab Emirates and Japan are building the infrastructure necessary to construct a solid foundation of rules for the burgeoning crypto industry.