Pump and dump

How does it work?

1. Set-up. The organisers buy a large amount of a small coin, often a MemecoinMemecoinA cryptocurrency born from an internet joke or meme, usually with little or no practical use, whose price rests almost entirely on hype. built on jokes rather than any real use. With coins like these, it takes little money to move the price.
2. Pump. They spread exaggerated or false claims on social media and in Telegram or Discord groups, often with the help of influencers. The message is always the same: buy now before it is too late.
3. Dump. Once the price has risen, they sell everything they own. The price often collapses within minutes or hours.

The last people to buy lose the most. Once the crash starts, it is often almost impossible to sell at a fair price.

The risks and the law

A pump and dump feeds on FOMOFOMOThe fear of missing out, which pushes people to buy in a hurry when prices rise fast, often close to the top.. It is market manipulation, and in the EEA, MiCA bans spreading false or misleading information to influence the price of crypto-assets. But these schemes are often run from abroad or anonymously, so getting your money back can be hard.

Warning signs:

• A little-known coin that has shot up in a short time.
• Promises of multiplying your money, and pressure to buy right away.
• Anonymous groups or influencers urging everyone to buy the same coin at the same time.

If something looks like a chance you can't afford to miss, it is often a trap. A related scam is the rug pullRug pullA scam where the people behind a new token or crypto project collect money from buyers and then vanish with it, leaving the token worthless., where a project's creators disappear with the money.