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Example of a pump-and-dump chat group with over 40,000 members. Left: Telegram group ‘Rocket dump’. Right: Corresponding exchange data (Binance) of the targeted coin (Yoyo) showing the effect of the pump. The yellow, purple, and maroon lines represent the moving average for the last 7, 25, and 99 days respectively
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Abstract Pump-and-dump schemes are fraudulent price manipulations through the spread of misinformation and have been around in economic settings since at least the 1700s. With new technologies around cryptocurrency trading, the problem has intensified to a shorter time scale and broader scope. The scientific literature on cryptocurrency pump-and-du...
Citations
... Scams, Ponzi schemes, and exchange hacks can lead to substantial losses for investors, while money laundering facilitates illicit activities and undermines regulatory efforts. These fraudulent activities not only harm individual victims but also have broader negative consequences, potentially hindering the mainstream adoption of cryptocurrencies and inviting stricter regulatory scrutiny, which can stifle innovation within the industry [6] [2]. ...
Cryptocurrencies have revolutionized financial transactions by enabling decentralized, pseudonymous, and borderless payments. However, this anonymity also facilitates fraudulent activities such as pump-and-dump schemes, fake investment opportunities, and money laundering.The rapid adoption of cryptocurrencies in Ethiopia has been accompanied by an increase in fraudulent schemes, particularly on messaging platforms like Telegram. Scammers exploit the lack of regulatory oversight and public awareness to promote fake investment opportunities , Ponzi schemes, and phishing attacks. This study explores the application of Large Language Models (LLMs) to detect and track cryptocurrency fraud on Telegram in Ethiopia. By analyzing scam patterns, keyword filtering, and behavioral analysis, we develop a framework to identify fraudulent activities. Our findings highlight common scam tactics, linguistic markers, and the effectiveness of LLMs in flagging suspicious content. The study contributes to fraud detection in low-regulation environments and proposes policy recommendations for mitigating cryptocurrency scams in Ethiopia.
... P &D is an information-based manipulation, artificially raising the price of a stock through the dissemination of false information. As shown in Fig. 1, this manipulation strategy involves three different stages (Kamps and Kleinberg, 2018). The operators of the scheme first purchase the stock that they are planning Content courtesy of Springer Nature, terms of use apply. ...
... To identify P &Ds within the market, patterns associated with the scheme must be established. While the method of conducting a P &D may vary, two indicators that can identify them are sharp changes in price and volume (Kamps and Kleinberg, 2018). A P &D will cause a significant price increase within a short amount of time, larger than the fluctuations that the stock typically experiences; followed by a decrease once the dump phase has begun. ...
The intersection of social media, low-cost trading platforms, and naive investors has created an ideal situation for information-based market manipulations, especially pump &dumps. Manipulators accumulate small-cap stocks, disseminate false information on social media to inflate their price, and sell at the peak. We collect a dataset of stocks whose price and volume profiles have the characteristic shape of a pump &dump, and social media posts for those same stocks that match the timing of the initial price rises. From these we build predictive models for pump &dump events based on the language used in the social media posts. There are multiple difficulties: not every post will cause the intended market reaction, some pump &dump events may be triggered by posts in other forums, and there may be accidental confluences of post timing and market movements. Nevertheless, our best model achieves a prediction accuracy of 85% and an F1-score of 62%. Such a tool can provide early warning to investors and regulators that a pump &dump may be underway.
... They will tell all members of the telegram group that they expect a pump of 1000% growth and everyone will get rich. Looking at Figure 3, it is shown that the pump started at 16:00 already (Kamps, 2018). ...
... Some investors would have made some profits if they sold in time, but not nearly close to the 1000% promised. Other investors would already be at a loss (Kamps, 2018). ...
... They would participate again, and would lose again. It should be noted that pump-and-dumps are illegal and one should never participate in these events (Kamps, 2018). ...
As deepfakes and scams online become more common, many individuals, organizations and nation-states struggle to maintain trust and remain credible sources for their stakeholders. Increasingly algorithms shape the digital information landscape, choosing what content is displayed and deepening the individual silos of information seeking. Recently it has been suggested that the best efforts to combat misinformation are not to try to stop its spread but through understanding the vulnerabilities on which it lands in the individual receiving the false information. There is an urgent need to investigate the mechanisms and extent of deception in online environments, as little is known about these specific vulnerabilities that then cause individuals to become victims for online scams. In the digital environment, different vulnerabilities exist yet they result from siloed studies in specific contexts. This paper starts by categorizing the different levels on which digital communication may be vulnerable. Further, this research asks how these vulnerabilities are utilized and what persuasion tactics are at use when crypto scams are concerned. Building on the persuasion principles, this paper analyzes three recent highly successful online scams. The findings conclude that social proof and scarcity were most used influence mechanisms, suggesting that scam prevention needs to understanding the vulnerabilities on which these influence mechanisms build.
... The cycle often repeats, exploiting market vulnerabilities and undermining trust among investors, as depicted in the list below. Although traditional analysis of trading volume and token price can provide valuable indicators for the emergence of P&D schemes [5], recent advances in large language models (LLMs) [6]- [8] allow for better detection and understanding of these manipulations. LLMs enable detailed analysis of Telegram messages, often the primary medium through which P&D organizers communicate with participants. ...
... Early studies on P&D schemes focused on identifying price and volume anomalies after pumps occurred [5], achieving moderate success but underscoring the need for more sophisticated models. Real-time detection approaches, such as anomaly detection using machine learning [15], have shown promise but suffer from latency issues, as seen in the 30minute lag of certain methods [16]. ...
Cryptocurrency markets often face manipulation through prevalent pump-and-dump (P&D) schemes, where self-organized Telegram groups, some exceeding two million members, artificially inflate target cryptocurrency prices. These groups sell premium access to inside information, worsening information asymmetry and financial risks for subscribers and all investors. This paper presents a real-time prediction pipeline to forecast target coins and alert investors to possible P&D schemes. In a Poloniex case study, the model accurately identified the target coin among the top five from 50 random coins in 24 out of 43 (55.81%) P&D events. The pipeline uses advanced natural language processing (NLP) to classify Telegram messages, identifying 2,079 past pump events and detecting new ones in real-time. Our analysis also evaluates the susceptibility of token standards - ERC-20, ERC-721, BRC-20, Inscriptions, and Runes - to manipulation and identifies exchanges commonly involved in P&D schemes.
... One of the pioneering studies on this topic was [9], which introduced a comprehensive framework for understanding pump-and-dump operations. The authors highlighted the targeting of small market cap cryptocurrencies due to their lower trading volumes, utilizing data from 5 prominent crypto exchanges: Binance, Bittrex, Kraken, Kucoin, and Lbank. ...
The cryptocurrency market has been subject to various forms of exploitation, with pump-and-dump schemes being a persistent problem that can lead to significant price volatility and financial losses. Prior studies have focused on predicting attack targets using machine learning approaches; however, these methods are often compromised by class imbalance and biases inherent in historical data. To address this limitation, we present a novel framework for manipulation targets prediction. We employ two-step bias-minimizing data normalization techniques to mitigate the effects of class imbalance and temporal heterogeneity. We also propose several innovative machine learning approaches including imbalance-aware hyperparameters optimization and ranking algorithms. Our evaluation reveals that the proposed framework outperforms existing methods, achieving an accuracy rate of 5\% and a top-10 accuracy rate of 45\% on a highly imbalanced dataset of historical P\&Ds events(imbalance ratio 270). For further validation, we construct a portfolio strategy based on predicted target class probabilities to assess the practical application of our constructed models.
... HD Pump integrates techniques from anomaly detection [Olteanu et al., 2023] and change point detection [Truong et al., 2020]. Besides that, it demonstrates a significant performance improvement, achieving an 84.3% recall, 56.8% precision, and 67.9% F1-score compared to the strict configuration of Kamps and Kleinberg [2018], which scored 75.0% recall, 50.1% precision, and 60.5% F1-score on the same datasets. ...
... The pump-and-dump scheme has a long history in the stock market and a straightforward premise [Kamps and Kleinberg, 2018]. Initially, the perpetrators identify a publicly traded security, typically of small size and with low trading volumes, as their target. ...
... The perpetrators then release a biased review, highlighting supposed high profitability for participants [Xu and Livshits, 2019]. Kamps and Kleinberg [2018] was one of the pioneering studies in cryptocurrency PD schemes. It offered an early formalization of these schemes and presented a methodology for detecting them using AD algorithms. ...
The adoption of cryptocurrencies has created a favorable environment for price manipulation practices, such as pump-and-dump (PD) schemes. These schemes aim to artificially inflate an asset's price, followed by a rapid sell-off, which may harm unaware investors. Given the brief duration of PD scheme effects, their impact on the asset's price series can be considered anomalies. Most studies rely on classification-based anomaly detection techniques to identify the PD event, which presents an opportunity to explore techniques beyond anomaly detection. To address this, we explore the combination of anomaly and change point detection to enhance pump-and-dump scheme detection. We introduce HD Pump, a hybrid detection method that integrates both techniques. Experimental results demonstrate that our hybrid approach significantly improves performance, achieving a 6.7% increase in precision and a 9.3% increase in recall compared to the benchmark method that solely uses anomaly detection.
... With substantial funds flowing into DeFi applications, the allure of scams and cyber attacks has grown. Cryptoeconomic strategies, such as transaction reordering [100,118], flash loan abuse [164], arbitrage opportunities [44], and pump-and-dump schemes [221,98], have been adapted to exploit vulnerabilities in the NFT market. ...
The Non-Fungible Tokens (NFTs) has the transformative impact on the visual arts industry by examining the nexus between empowering art practices and leveraging blockchain technology. First, we establish the context for this study by introducing some basic but critical technological aspects and affordances of the blockchain domain. Second, we revisit the creative practices involved in producing traditional artwork, covering various types, production processes, trading, and monetization methods. Third, we introduce and define the key fundamentals of the blockchain ecosystem, including its structure, consensus algorithms, smart contracts, and digital wallets. Fourth, we narrow the focus to NFTs, detailing their history, mechanics, lifecycle, and standards, as well as their application in the art world. In particular, we outline the key processes for minting and trading NFTs in various marketplaces and discuss the relevant market dynamics and pricing. We also consider major security concerns, such as wash trading, to underscore some of the central cybersecurity issues facing this domain. Finally, we conclude by considering future research directions, emphasizing improvements in user experience, security, and privacy. Through this innovative research overview, which includes input from creative industry and cybersecurity sdomain expertise, we offer some new insights into how NFTs can empower visual artists and reshape the wider copyright industries.
... The memecoin market, with its high risks and rapid price swings, resembles a gambling arena where the thrill is tied to economic outcomes rather than the experience of social or humorous engagement. These characteristics -subject to herd mentality and vulnerable to manipulative schemes (Cary, 2021;Kamps & Kleinberg, 2018) -emphasise that while social support is instrumental in shaping investment decisions, it is the lure of monetary success that delivers the true adrenaline rush to investors. Bouteska et al. (2023) argue that memecoins, such as Dogecoin, are more comparable to social media phenomena and endorsements from public figures than more established cryptocurrencies, which have gained a firmer market foothold and thus exhibit lesser volatility. ...
Situated at the intersection of traditional finance and the rapidly evolving meme economy, memecoins present a compelling case for analysing investment motivations. Employing structural equation modeling, this research analyzes data from n = 153 participants experienced in cryptocurrency or stock market investments. Insights from motivational and social support theories help elucidate the relationship between perceived economic value and intrinsic investment factors. Results highlight that perceived economic value enhances the enjoyment of investing. Furthermore, social support influences perceptions of memecoins’ economic value, while perceived ease of investment affects only investment enjoyment, without significant impacts on economic value or investment intentions. This study enriches understanding in the nascent memes and finance field, offering empirical insights to guide future research and policy.
... Stolen data refers to the electronic information collected as a result of "exploitation of the vulnerability in a computer system or an unauthorized leak by someone with access to the data" (Thomas et al. 2017, p. 1). Several of such stolen data markets have been discovered in the application called 'Telegram' (Kamps and Kleinberg 2018). ...
Illicit data markets have emerged on Telegram, a popular online instant messaging application, bringing together thousands of users worldwide in an unregulated exchange of sensitive data. These markets operate through vendors who offer enormous quantities of such data, from personally identifiable information to financial data, while potential customers bid for these valuable assets. This study describes how Telegram data markets operate and discusses what interventions could be used to disrupt them. Using crime script analysis, we observed 16 Telegram meeting places encompassing public and private channels and groups. We obtained information about how the different meeting places function, what are their inside rules, and what tactics are employed by users to advertise and trade data. Based on the crime script, we suggest four feasible situational crime prevention measures to help disrupt these markets. These include taking down the marketplaces, reporting them, spamming and flooding techniques, and using warning banners.
... In addition to assessing the anonymity inherent in cryptocurrencies, the academic literature has increasingly focused on a range of financial crimes facilitated by cryptocurrencies (Braaten and Vaughn, 2019;Dawes Centre for Future Financial Crime, 2021;Durrant and Natarajan, 2019;Gandal et al., 2018;Grobys, 2021;Kamps and Kleinberg, 2018;Teichmann and Falker, 2021;Trozze et al., 2021;Trozze et al., 2022). Some examples of offenses that have been committed using cryptocurrencies include hacks, initial coin offering (ICO) scams, Ponzi schemes, market manipulation, money laundering, sanctions violation, tax evasion, theft, malware and other fraud (Gandal et al., 2018;Kamps and Kleinberg, 2018;Reynolds and Irwin, 2017;Teichmann and Falker, 2021;Trozze et al., 2022). ...
... In addition to assessing the anonymity inherent in cryptocurrencies, the academic literature has increasingly focused on a range of financial crimes facilitated by cryptocurrencies (Braaten and Vaughn, 2019;Dawes Centre for Future Financial Crime, 2021;Durrant and Natarajan, 2019;Gandal et al., 2018;Grobys, 2021;Kamps and Kleinberg, 2018;Teichmann and Falker, 2021;Trozze et al., 2021;Trozze et al., 2022). Some examples of offenses that have been committed using cryptocurrencies include hacks, initial coin offering (ICO) scams, Ponzi schemes, market manipulation, money laundering, sanctions violation, tax evasion, theft, malware and other fraud (Gandal et al., 2018;Kamps and Kleinberg, 2018;Reynolds and Irwin, 2017;Teichmann and Falker, 2021;Trozze et al., 2022). Teichmann and Falker (2021) conducted a detailed analysis of the methodologies used by money launderers to launder funds using cryptocurrencies. ...
... Echoing this focus, Trozze et al. (2022), while deliberately excluding a discussion of problems related to money laundering or areas of crime other than fraud, used a combination of a literature survey and an expert consensus exercise to ascertain that Ponzi schemes/high-yield investment programs, and ICO scams were the most frequently discussed cryptocurrency frauds across all literature. To combat financial crimes via cryptocurrencies, the scholarly literature has also directed attention toward the identification and detection of such illicit behavior (Farrugia et al., 2020;Gandal et al., 2018;Grobys, 2021;Kamps and Kleinberg, 2018;Park and Youm, 2021;Rognone et al., 2020;Shi et al., 2019;Sureshbhai et al., 2020). Such a focus underscores the importance of and progress in developing advanced techniques for the surveillance and prevention of cryptocurrencyrelated financial crimes. ...
Purpose
This paper aims to investigate technological innovations within the crypto space that have engendered novel financial crime risks and their potential utilization amidst geopolitical conflicts.
Design/methodology/approach
The theoretical paper uses an analysis of recent geopolitical events, with a key focus on using cryptocurrencies to undertake illicit activities.
Findings
The study found that cryptocurrencies and the innovations made within the crypto domain are used for both legitimate and illicit purposes, including money laundering, terrorism financing and sanction evasion.
Originality/value
This research contributes to understanding the critical role cryptocurrencies play amidst geopolitical conflicts and emphasizes the need for regulatory considerations to prevent their misuse. To the best of the authors’ knowledge, this paper is the first scholarly contribution that considers the evolving mechanisms afforded by cryptocurrencies amidst geopolitical conflicts in undertaking illicit activities.
