In 2022, cryptocurrency investors invested $4.6 billion in the purchase of tokens believed to be part of Pump & Dump schemes. According to a Chainalysis report.
Organisers of pump-and-dump schemes create hype around an asset to attract investors, while secretly selling their stake at inflated prices.
Analysts found that more than 9,900 tokens launched on the networks BNB Smart Chain and Ethereum last year were created solely to carry out such fraudulent activities.
The most prolific in applying the scheme was an unnamed company that issued 264 such tokens.
Chainalysis considered an asset a potential Pump & Dump if within a week after launch it had at least 10 swaps and four consecutive days of trading on DEX. Of the 1.1 million new tokens issued in 2022, more than 40,500 meet these criteria.
If the token price in the first week fell by 90% or more, Chainalysis considered this an additional factor supporting its use in pump-and-dump schemes. The firm found that 24% of the 40,500 analysed coins meet the secondary criterion.
Chainalysis estimates that behind the analysed fraudulent tokens are 445 individuals or groups, indicating they launched several projects. Their total profit from selling their assets amounted to $30 million.
“It is possible that, in some cases, token issuers did everything possible to create a healthy supply, and the subsequent price drop arose from other market circumstances,” the firm added.
However, in a separate report, the analytics firm noted that revenues from cryptocurrency scams fell by almost half in 2022, mainly due to declines in digital asset prices.
Earlier in September 2022, crypto investor and blogger Lark Davis was accused of repeated involvement in pump & dump schemes.