The crypto market has never been safe from classic fraud. What looks like a golden opportunity can be a trap. Because a token surges overnight, influencers hype it everywhere, and early buyers promise huge returns. Then, the price crashes. Consequence? The ones who joined late end up losing everything.
This is what we call a pump and dump scam and it is not just history. Unfortunately, it is still active in the Crypto market.
So, yes, too-good-to-be-true hypes can lead to major losses. If you’re not careful, you could end up holding tokens no one wants.
So, What is a Pump and Dump Scam in Crypto?
A pump and dump scam in crypto is a fake hype scheme. Basically, scammers pick a low-value cryptocurrency, talk it up with false claims, make its price shoot up fast, and then sell everything at the peak. When they sell, the price crashes and the people who bought late lose their money.
Let’s say someone creates a new token called MoonX. They launch it on a decentralized exchange. At first, it had almost no value. The creators hold most of the tokens. Then, they start promoting it on Telegram, Twitter, and Reddit. They claim it will “disrupt finance” or “be the next big thing after Bitcoin.” Influencers post charts showing sharp gains. Fake followers hype it up in comment sections. All of this creates FOMO—the fear of missing out.
You see the price of MoonX go from $0.01 to $0.50 in a few hours. People rush in. The volume increases. More traders jump in, thinking the coin is about to explode. At this point, the scammers dump their holdings. They remove liquidity or sell all their tokens.
Suddenly, the price crashes back to $0.01—or even lower. The coin becomes worthless. The fraudsters walk away with profit. You are left with useless tokens.
This is a manipulative trading scheme. It uses emotional tactics and exploits the lack of regulation in decentralized finance (DeFi). It targets low-cap assets and often relies on wash trading, where scammers fake activity using multiple wallets.
The goal is not long-term growth. The goal is to profit fast—at your expense.
Pump and Dump VS Rug Pulls
| Aspect | Pump and Dump | Rug Pull |
| Definition | Artificial price increase followed by mass sell-off by scammers. | Project creator drains funds and abandons the token. |
| Common Target | Low-cap tokens with limited liquidity. | Tokens with smart contracts that control user funds. |
| Main Tactic | False promotion and hype to pump price. | Direct withdrawal of liquidity or contract funds. |
| Execution Time | Short-term (often within hours or days). | Can be immediate or occur after building trust. |
| Investor Loss | Investors buy at peak and lose after a crash. | Investors lose all access to locked or pooled funds. |
| Key Platform | Decentralized exchanges (DEXes) and social media. | DEXes with liquidity pools and smart contracts. |
| Visibility | Public price movements visible during the pump. | Often sudden with little warning before exit. |
| Legality | Illegal as market manipulation. | Considered fraud or theft in many jurisdictions. |
How Do Fraudsters Create the Hype Around a Token?
Pump and Dump fraudsters use a mix of emotional manipulation, fake social proof, and false credibility to hype up worthless or weak tokens. The aim is simple: create a buying frenzy. Once the price rises, they sell off their holdings. The token crashes. You are left with losses.
1. Fake Social Proof
Scammers flood Telegram, Twitter (X), and Reddit with coordinated messages. They use bots, fake influencers, and paid comment spam to make a project trend. You might see “community buzz,” but most of it is fake.
The Squid Game Token (SQUID) went viral in 2021. It rose over 75,000% in less than a week. Buyers couldn’t sell due to smart contract restrictions. The project team vanished after making an estimated $3.3 million.
2. Paid Influencer Promotions
Some influencers promote tokens in exchange for money. Often, they hide that it’s a paid post. These tokens appear in “Top Crypto Picks” videos or tweet threads. Audiences trust the influencers and buy in without research.
The SaveTheKids Token was backed by several gaming influencers, including members of FaZe Clan. After launch, insiders dumped the token. It lost almost all value within days. The influencers later denied involvement or blamed others.
3. Fake News and Partnerships
Fraudsters also release fake press releases or claim partnerships with big names like Binance, Tesla, or Coinbase. They create clone websites or fake logos to make it look real.
In 2021, a scam token falsely claimed a partnership with Tesla. It went viral in crypto Facebook groups. Once enough people invested, the scammers exited. No such partnership ever existed.
4. Wash Trading and Fake Volume
Wash trading means buying and selling the same token between wallets owned by the same person. This fakes volume on decentralized exchanges (DEXs) and misleads investors into thinking there is demand.
Chainalysis found that out of 370,000 Ethereum tokens launched in 2023, over 90,000 showed signs of manipulation, including wash trading and liquidity dumps. See, these made up only 1.3% of total volume, but caused over $240 million in estimated fraud.
5. Pre-Sales, Allowlists, and Time Pressure
Fraudsters often run pre-sale events or use exclusive allowlists. You may be told that “only 500 people” can invest early. The urgency triggers FOMO. Once the token goes public, the scammers dump their share.
Many Binance Smart Chain (BSC) scams in 2021–22 operated like this. Tokens were launched via pre-sales, pumped by Telegram hype, and then dumped within 48 hours of public trading.
How Can You Identify a Crypto Pump and Dump?
A crypto pump and dump scheme can often be spotted by patterns of fake hype, price manipulation, and aggressive promotion. Scammers use psychological tricks and social influence to push worthless tokens. So, you should stay alert and watch for specific warning signs before investing.
- Sudden and sharp price increases without real news
- Heavy promotion on Telegram, Twitter, or Reddit
- Influencer content with vague or exaggerated claims
- Announcements of fake partnerships or exchange listings
- Unusual trading volume from new or inactive tokens
- Urgency-driven messages like “don’t miss out” or “last chance”
- Lack of project transparency or anonymous founders
- No visible roadmap, product, or audited code
- High token concentration in a few wallets
- Comment sections disabled or flooded with fake engagement
What are the Real Costs of Falling for a Pump and Dump Scam?
See, falling for a pump and dump scam in Crypto can lead to more than just a financial loss. You may lose trust, time, and future opportunities. Many victims buy in late, thinking the price will keep rising. Instead, the price collapses within hours or days. You are left holding worthless tokens that no one wants to buy.
The damage goes beyond your wallet. You may feel betrayed, embarrassed, or hesitant to trust other Crypto projects again. Pump and Dump scams hurt the overall credibility of the Crypto market along with slowing down real innovation as it drives cautious investors away.
Here are the real costs you may face:
- Loss of your entire investment
- No legal recovery due to lack of regulation
- Reduced confidence in legitimate crypto projects
- Missed chances to invest in real assets
- Mental stress and emotional regret
- Increased risk of falling for future scams
- Difficulty in selling illiquid or abandoned tokens
- Exposure to more scams through Telegram or Discord channels you joined
You should always research before investing. Remember that a Crypto project with no clear team, no audit, and no working product is rarely safe.
Are There Legal Consequences for Perpetrators of Pump and Dump Schemes?
Yes, there can be legal consequences for people who run pump and dump schemes—especially in regulated markets. In many countries, this type of fraud falls under market manipulation or securities fraud. If authorities find enough evidence, they can press criminal charges, impose fines, or ban offenders from trading.
In the United States, the Securities and Exchange Commission (SEC) actively investigates pump and dump cases. If a person promotes a token with false claims and profits from a price surge, the SEC can file civil or criminal charges—even in crypto markets. Although crypto is less regulated than traditional finance, the law still applies when fraud occurs.
For example, In 1999, Jonathan Lebed, a teenager, manipulated stock prices using online forums. The SEC fined him, marking one of its first internet-based pump and dump cases.
Moreover, in 2021, U.S. authorities arrested several YouTubers and Twitter influencers for running coordinated stock and crypto pump schemes through Discord.
You should know that even anonymous wallets can be traced. Blockchain data can reveal patterns. So, if caught, perpetrators can face:
- Heavy financial penalties
- Asset seizures
- Trading bans
- Criminal prosecution and jail time
Even if enforcement takes time, the digital trail makes it hard to escape consequences forever.
Major Pump and Dump Schemes in Crypto History
Major Pump and Dump Schemes in Crypto History
| Token/Project | Year | Key Details | Estimated Losses |
| Squid Game Token (SQUID) | 2021 | No withdrawal function, promoted using Netflix show’s name, price surged 75,000% then collapsed | $3.3 million |
| SaveTheKids Token | 2021 | Promoted by FaZe Clan influencers, marketed as charity, dumped immediately after launch | Not publicly disclosed |
| BitConnect | 2018 | Offered high returns via lending, collapsed after being labeled Ponzi, led to global investigations | $1 billion+ |
| Centra Tech | 2017 | Promoted by Floyd Mayweather and DJ Khaled, fake partnerships claimed, founders arrested | $25 million |
| MandoX | 2022 | Token promoted on Twitter and Discord, sudden crash after team sold large portion | Unknown |
| Token A (Chainalysis case) | 2023 | Part of coordinated pump using wash trading, liquidity pulled in days, traced via on-chain data | $55,000 from 108 victims |
Final Words
Pump and dump is one of the most damaging crypto scams in the market. It is not easy to pull off without planning, but once executed, it causes serious harm. Investors lose money, trust, and time. The market loses credibility. Scammers walk away with profits, while victims are left with worthless tokens.
You should stay alert. Do not let hype guide your decisions. Always check the facts, verify the token, and research the people behind it. If something feels forced or too good to be true, walk away.
The safest choice in crypto is an informed one.
