Hundreds of masterminds behind most pump-and-dump crypto coin schemes worldwide collect a staggering $250 million annually
- Pump-and-dump schemes dominate crypto markets, driven by 438 manipulative masterminds
- Telegram’s ease of communication fuels the rise of crypto manipulations
- Advanced tools like Perseus expose crypto scammers, but regulation remains essential
As cybersecurity faces challenges with common internet scams like phishing, advanced fee fraud, and fake lotteries, cryptocurrency pump-and-dump schemes have emerged as a significant issue.
A recent study from researchers at University College London revealed just 438 masterminds are responsible for the majority of pump-and-dump crypto schemes worldwide.
These masterminds manipulate crypto coins by inflating prices through misleading hype, selling them once enough buyers are lured, collectively accounting for $3.2 trillion in artificial trading and earning $250 million annually. According to Google, such “cloaking” scams are the most damaging scams around.
Telegram is the preferred platform for manipulation
The researchers found popular encrypted messaging app Telegram is the primary tool used by crypto coin masterminds to spread false information, with manipulators using channels and chats to create artificial demand for coins.
“On the app, chats are used to communicate between potential buyers and sellers,” the researchers note.
With easy communication and limited regulation, manipulators convince others to buy into the hype, leaving many victims unaware of the risks and devastated by the schemes.
As the research team pointed out, the simplicity of executing these scams “should be of concern to those attempting to make money off crypto coin investing.”
To track these schemes, the researchers developed Perseus, a tool capable of analyzing the coordination efforts behind these manipulations.
Similar to AI-powered scam detectors like the one developed by McAfee, which stops scammers before they can reach potential victims, Perseus helps identify the masterminds behind the scams and measure their impact.
Perseus consists of three components: a real-time fetcher, a temporal attributed graph generator, and a mastermind detector. These technologies work together to uncover and track the key figures orchestrating these scams.
The researchers suggest that tools like Perseus, along with other scam detection technologies, could be crucial in recognizing harmful schemes within the largely unregulated crypto space.
“At some point, some form of regulation is going to be needed to keep the system running,” they concluded.
As cryptocurrencies grow in popularity, the prevalence of scams raises concerns about market stability, with the lack of regulations leaving investors vulnerable to manipulations.
Via Techxplore