Pump and dump
Pump and dump is a fraud in which promoters raise an asset's price with hype or misleading claims, then sell their own holdings into the rise, after which the price usually falls and later buyers lose money.[1][2] In memecoin markets the pattern overlaps with the Rug pull and is often carried out with bundled or sniped launch supply, paid KOL promotion and wash trading.
How it works[edit]
The US SEC's investor site describes promoters spreading false or misleading information, often online, to push the price up, then selling at the peak; when the promotion stops the price typically collapses.[1] Chainalysis describes the crypto version as insiders driving a token up, often through coordinated hype, and selling at the top.[2] US prosecutors in 2024 described defendants who used wash trades to inflate a token's price and volume and then sold at the inflated prices, "a fraud commonly known as a 'pump and dump.'"[4]
Scale[edit]
Chainalysis found that 74,037 of the 2,063,519 tokens launched in 2024, about 3.59%, showed patterns that may be linked to pump-and-dump schemes; its study covered Ethereum, BNB Smart Chain and Base.[2] For Solana, Solidus Labs reported in May 2025 that about 98.6% of tokens launched on pump.fun from January 2024 to March 2025 fell below $1,000 in liquidity, a finding it published as a report on rug pulls and pump-and-dumps.[3]
Regulation[edit]
On 9 October 2024 the US Attorney's Office in Massachusetts charged 18 individuals and entities, including the market makers ZM Quant, CLS Global, MyTrade and Gotbit, in a case built partly on NexFundAI, a token the FBI created to catch manipulators; more than $25 million in crypto was seized.[4] The SEC filed parallel civil suits against Gotbit, ZM Quant, CLS Global and others, and accused promoter Vy Pham of manipulating the Saitama Inu and Robo Inu tokens; Pham and two associates agreed to bifurcated settlements.[5] Gotbit founder Aleksei Andriunin pleaded guilty to wire fraud and market-manipulation charges in March 2025 and was sentenced to eight months in prison.[6]
The SEC's Division of Corporation Finance said on 27 February 2025 that meme coins of the kind it described are not securities, while noting that fraud involving them may still be pursued by other federal or state agencies.[7]
Examples[edit]
- Hawk Tuah: HAWK launched on 4 December 2024 and fell more than 90% from a market cap of about $400 million; about a dozen investors sued its promoters, alleging an unregistered securities offering. Haliey Welch was not a defendant and said the FBI and SEC cleared her.[8]
- NexFundAI: a token the FBI created for a fictitious company, which three of the charged market makers were accused of wash trading.[4]
Timeline[edit]
- 2024-10-09: DOJ and SEC charge market makers and promoters in the NexFundAI case[4][5]
- 2024-12-04: HAWK launches[8]
- 2025-02-27: SEC staff statement on meme coins[7]
- 2025-06-13: Gotbit founder sentenced[6]
See also[edit]
References[edit]
- ^ Pump and Dump Schemes, Investor.gov (US SEC), n.d.
- ^ Market Manipulation: Suspected Wash Trading on Select Blockchains May Account for Up To $2.57 Billion in Trading Volume, Chainalysis, 2025-01-29
- ^ The 2025 Rug Pull Report: Rug Pulls and Pump-and-Dumps on Solana, Solidus Labs, 2025-05
- ^ Eighteen Individuals and Entities Charged in International Operation Targeting Widespread Fraud and Manipulation in the Cryptocurrency Markets, US Attorney's Office, District of Massachusetts, 2024-10-09
- ^ SEC, FBI, DOJ coordinate takedown of fraudulent crypto firms, Cointelegraph, 2024-10-09
- ^ Gotbit founder Aleksei Andriunin sentenced to 8 months following wash trading scheme, The Block, 2025-06-13
- ^ Staff Statement on Meme Coins, US SEC Division of Corporation Finance, 2025-02-27
- ^ 'Hawk Tuah' girl says FBI, SEC cleared her of legal wrongdoing in memecoin fiasco, The Block, 2025-05-21