Tulsa, New Mexico and Tel Aviv University’s Research: Fake Crypto Schemes Run Rampant on Telegram and Discord

Ever since the blockchain gained prominence, a major concern has been the “wild west” tag attributed to this segment. In truth, this is mostly accurate owing to a decisive lack of regulations to govern the fledgling industry. This has made the entire market ripe for nefarious activities. A recent study has found that this is far worse than most would think.

An academic paper recently published by a team of researchers from the University of Tulsa, University of New Mexico and Tel Aviv University based its findings on data from Telegram and Discord messenger applications. It was found that the Crypto market was littered with many “Pump-and-Dump Schemes“, more than 4800, undoubtedly owing to the fact that most countries have loose or nonexistent rules around cryptos. The academics identified most of these attempts were made in the early part of the year, mainly between January and July, when the crypto fever was at its zenith. The scale was “widespread and often quite profitable,” and a clear cause of concern. While the smaller coins were the prime focus, “Bitcoin is not immune from the pump-and-dump phenomenon,” the authors noted as nearly a 100 such efforts focused on the most well-known crypto.

How Did It Work

This uninterested attitude has given con artists a free rein and they have been able to brazenly manipulate the price of most digital currencies. The researches further pointed out

“The proliferation of cryptocurrencies and changes in technology have made it easier to conduct pump and dump schemes. While the fundamentals of the ruse have not changed in the last century, the recent explosion of nearly 2,000 cryptocurrencies in a largely unregulated environment has greatly expanded the scope for abuse.”

The modus operandi has been hardly sophisticated, the scammers would push a particular coin, at a higher price, onto the market and then sell off the assets. The research found that many of these schemes did not even shy away from the fact that they were trying to manipulate the crypto markets.

As noted, the perpetrators would release lesser known coins, in small batches, as this was more value for money at a lower risk compared to the more well-known coins. However, when the prices climbed down from the record highs of the January bull run, many coins have lost a majority of their inflated values, and these scams have also decreased.

Actions And Reactions

As expected, this has given a fresh and louder voice to the clamor for tighter crypto regulations. It is not as if the government is wholly unaware. Recently, a Bitcoin exchange-traded fund, which many had hoped would help with the general adoption of digital currencies, was denied approval by the Securities and Exchange Commission. At the time the SEC had voiced similar manipulation fears. In May, the U.S. Justice Department had begun closely monitoring trading and even started a criminal probe to look into the possibility of traders colluding to manipulate cryptocurrencies prices.

The paper lays out the extent of market abuse that is plaguing the cryptocurrencies industry. It needs to be seen if such damning reports wakes the governments from their slumber and provide the much-needed support that this niche industry so desperately needs.