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Australian ASIC regulator in pursuit of cryptocurrency pumping and dumping schemes

  • The Australian watchdog ASIC reported on pump and dump schemes and how it dismantled them.
  • Although cryptocurrencies are largely unregulated, these activities remain illegal because of the financial risk they pose to investors, one of the spokespersons for the regulatory body noted.

The Australian Securities and Investments Commission (ASIC) launched an investigation into pump and dump schemes in October. It targeted social channels such as Twitter, Telegram and HotCopper, the Australian stock exchange chat forum.

Pump and dump plots are usually orchestrated in social media groups, such as those on Telegram, where participants take advantage of encryption and anonymity. They consist of coordinating a group of people to buy large amounts of a small-traded signal to increase its price. Most traders who were not in the scheme tend to follow the trend and buy because of the FOMO. At some point, the coordination group withdraws, leaving losses to the other investors.

The ASIC successfully dismantled some of these Telegram groups and took the advice of Talis Putnins, a financial researcher and cryptocurrency researcher. Their research shows that pump and dump groups operate cyclically, which tend to «correlate with general market sentiment and prices.» In this sense, such groups worked vigorously in 2018 and were seen to have done the same this year.

Pursuit of pump and dump conspiracy

In 2018, Putnins documented more than 355 cryptocurrencies-related pump and dump cases. According to their presentation, these groups have a «transparent pumping secret» with no «real effort to ignite the momentum.» They are «fully visible to all,» he says.

The Telegram group «Crypto Binance Trading | Signals & Pumps» organized one such scheme. The September 13 announcement in the group reads:

With our average volumes between $ 40 million and $ 80 million per pump and peaks reaching up to 450%, we are ready to announce our next big pump.

Our main goal for this pump will be to ensure that every member of our group makes a huge profit. We will also strive to achieve a volume of over $ 100 million in the first few minutes with a very high profit.

The same researcher co – authored a similar investigation last year, entitled ‘A New Wolf in Town? Pump Manipulation and Dumping in the Cryptocurrency Market ». The report concluded that the pump-dumping conspiracies had created «very large average price distortions of 65 percent, abnormal trading volumes in the millions of dollars, and large transfers of wealth between participants.»

The aforementioned group went into action on Sept. 19, and the Frax Share (FXS) token registered $ 65 million volume and earned a whopping 90 percent in one minute.

Supplementary Notes

Putnins notes that these groups contribute to «a shared understanding that cryptocurrencies are unregulated, so pumps are legal.»

In October, the ASIC issued a warning about another 300-member pump and dump group, the ASX Pump Organization. He pointed out that the activity was illegal and that members of the group were being monitored. In addition, the participants had a criminal record risk, a fine of more than a million dollars and prison sentences.

At the time, an ASIC spokesman noted that while cryptocurrencies were largely unregulated, these types of deals are still illegal as they could «inflict losses on investors and create unnecessary price volatility.»

Javier Marquez

Javier Marquez has been closely following the development of bitcoin and blockchain technology since 2017. Since then, he has been working as a columnist, reporting on the ups and downs, implications and developments of the cryptocurrency market. He believes that cryptocurrencies and blockchain technology will have a huge positive impact on people's lives.

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