76 research outputs found
Pump and Dumps in the Bitcoin Era: Real Time Detection of Cryptocurrency Market Manipulations
In the last years, cryptocurrencies are increasingly popular. Even people who
are not experts have started to invest in these securities and nowadays
cryptocurrency exchanges process transactions for over 100 billion US dollars
per month. However, many cryptocurrencies have low liquidity and therefore they
are highly prone to market manipulation schemes. In this paper, we perform an
in-depth analysis of pump and dump schemes organized by communities over the
Internet. We observe how these communities are organized and how they carry out
the fraud. Then, we report on two case studies related to pump and dump groups.
Lastly, we introduce an approach to detect the fraud in real time that
outperforms the current state of the art, so to help investors stay out of the
market when a pump and dump scheme is in action.Comment: Accepted for publication at The 29th International Conference on
Computer Communications and Networks (ICCCN 2020
The Role of Twitter in Cryptocurrency Pump-and-Dumps
We examine the influence of Twitter promotion on cryptocurrency pump-and-dump
events. By analyzing abnormal returns, trading volume, and tweet activity, we
uncover that Twitter effectively garners attention for pump-and-dump schemes,
leading to notable effects on abnormal returns before the event. Our results
indicate that investors relying on Twitter information exhibit delayed selling
behavior during the post-dump phase, resulting in significant losses compared
to other participants. These findings shed light on the pivotal role of Twitter
promotion in cryptocurrency manipulation, offering valuable insights into
participant behavior and market dynamics
An examination of the cryptocurrency pump-and-dump ecosystem
The recent introduction of thousands of cryptocurrencies in an unregulated environment has created many opportunities for unscrupulous traders to profit from price manipulation. We quantify the scope of one widespread tactic, the “pump and dump”, in which actors coordinate to bid up the price of coins before selling at a profit. We joined all relevant channels on two popular group-messaging platforms, Telegram and Discord, and identified thousands of different pumps targeting hundreds of coins. We find that pumps are modestly successful in driving short-term price rises, but that this effect has diminished over time. We also find that the most successful pumps are those that are most transparent about their intentions. Combined with evidence of concentration among a small number of channels, we conclude that regulators have an opportunity to effectively crack down on this illicit activity that threatens broader adoption of blockchain technologies
Pump, Dump, and then What? The Long-Term Impact of Cryptocurrency Pump-and-Dump Schemes
The pump and dump scheme is a form of market manipulation attack in which
coordinated actors drive up the price of an asset in order to sell at a higher
price. Due in part to a lack of enforcement, these schemes are widespread
within the cryptocurrency marketplace, but the negative impact of these events
on the coins they target is not yet fully understood. Drawing upon a novel
dataset of pump events extracted from Telegram channels, an order of magnitude
larger than the nearest comparable dataset in the literature, we explore the
differing tactics of pumping channels and the long-term impact of pump and dump
schemes across 765 coins. We find that, despite a short-term positive impact in
some cases, the long-term impact of pump and dump schemes on the targeted
assets is negative, amounting to an average 30% relative drop in price a year
after the pump event
Analyzing Target-Based Cryptocurrency Pump and Dump Schemes
As the number of cryptocurrencies has exploded in recent years, so too has the fraud. One popular strategy is when actors promote coordinated purchases of coins in hopes of temporarily driving up prices. Prior work investigating such pump and dump schemes has focused on the immediate impact to prices following pump signals, which were largely interpreted as following the same strategy. The reality, as with most cybercrimes, is that the operators of the schemes try out a much more heterogeneous mix of tactics. From a population of 12,252 pump signals observed between July 2017 and January 2019, we identify and examine 3,683 so-called target-based pump signals that announce promoted coins alongside buy and sell targets, but without a coordinated purchase time. We develop a strategy to measure the success of target pumps over longer time horizons. We find that around half of these pumps reach at least one of their sell targets, and that reaching their peak price often takes days, as opposed to the seconds or minutes required in pumps studied previously. We also examine the various groups promoting coins and present evidence that groups try a variety of distinct strategies and experience varying success. We find that the most successful groups promote many coins and issue many pumps, but not for the same coins. As decentralized finance becomes more popular, a deeper understanding of price manipulation techniques like target pumps is needed to combat fraud
From Inactivity to Full Enforcement: The Implementation of the Do No Harm Approach in Initial Coin Offerings
This Article analyzes the way the Securities and Exchange Commission (“SEC”) has enforced securities laws with regard to Initial Coin Offerings (“ICOs”). In a speech held in 2016, the U.S. Commodities Futures Trading Commission (“CFTC”) Chairman Christopher Giancarlo emphasized the similarities between the advent of the blockchain technology and the Internet era. He offered the “do no harm” approach as the best way to regulate blockchain technology. The Clinton administration implemented the “do no harm” approach at the beginning of the Internet Era in the 1990s when regulators sought to support technological innovations without stifling them with burdensome rules.
This Article suggests that the SEC adopted a “do no harm approach” and successfully pursued two of its fundamental institutional goals when enforcing securities laws in the context of ICOs: investor protection and preservation of capital formation. After providing a brief description of the basics of ICOs and the way they have evolved in the last two years, this Article examines the transition into a new phase of full enforcement action implemented by the SEC. This shift from inactivity to enforcement was gradual, characterized by clearly identifiable steps. Data on ICOs demonstrates that this rigorous enforcement of securities laws has not damaged the industry in the United States and may suggest that entrepreneurs have adapted to this enforcement approach. By contrast, a lack of enforcement would have probably increased uncertainty to the detriment of investors and entrepreneurs and put the UNITED STATES at a disadvantage in the international arena. Furthermore, this paper emphasizes the importance of pursuing specific goals in the short-to-medium term, particularly in order to make securities regulation uniform and avoid differences at the state and federal levels, as well as to encourage industry authorities such as Self-Regulatory Organizations (SROs) to develop high standards for self-regulation
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