AI Trading

Before talking in detail about pump-and-dump operations, it is important to know the basics of what crypto pump-and-dump groups are and how they work. In basic terms, due to the lack of regulatory measures surrounding cryptocurrencies, crypto pump-and-dump groups cheer a selected coin, which is unheard of before, via social platforms or messaging platforms like Discord or Telegram and then make money by selling them at inflated prices.

Pump-and-dump operations

Pump-and-dump operations have existed for multiple decades in the financial space and according to sources, these types of operations have been lurking around since the 18th century. This operation illegally controls the price valuations of certain assets by promoting fraudulent activities such as the distribution and spread of incorrect and non-factual information.

To better understand this, we can look at an example. Suppose an individual is holding shares in a company and suddenly starts to spread negative or false information regarding the company’s standing and revenue status. The intention behind this act is to control and swell the stock market rates and selling the shares at a falsely inflated price to people who were tricked into thinking that the company is seeing a massive growth rate and the stocks will flourish their investments into a new level.

AI Trading

As the financial industry has now evolved into a much bigger beast, with the introduction of cryptocurrencies and blockchain technology, these types of operations are continuing to occur. Not only are these operations happening actively, but have become even more dangerous, and must be watched out for carefully. As mentioned above, the lack of regulatory measures in the cryptocurrency market makes it even more venerable to such kinds of fraudulent operations, so it is important that every investor, trader or individual looking into the world of cryptocurrencies is aware of such kinds of schemes.

Proceeding with the article, we will now dive deeper into what pump-and-dump groups and operations look like in the cryptocurrency space.

Cryptocurrency pump-and-dump groups

Pump-and-dump groups are a collection of individuals who purposefully accumulate a valuable asset with the passage of time, falsely controlling its price valuation to reach better numbers and then conveying to investors about the success of the asset, urging them to purchase the asset in greater numbers at an inflated prices, selling them at a personal profit for themselves, meanwhile the buyers are left with assets having a fake valuation than their original, now dropping in value, leading to huge losses.

This scam operation is performed by multiple task-oriented groups of individuals. The surprising thing about this operation is that sometimes it can be quite challenging to spot an asset with a real valuation or an asset with an artificially inflated price valuation for those who are inexperienced. As mentioned previously, these type of scamming groups are mostly active on popular communication platforms like Discord, Telegram, WhatsApp, or basically any type of platform that involves chatting services, because they have access to a higher number of individuals to increase the potential of their scam.

As fraudulent as they may be, these pump-and-dump groups work in a very organized manner, having a properly structed system of hierarchy which highlights the position and relevant authority of individuals in the group. The group consist of both high and low-level members, with high-level members obviously having more access to information and opportunities to grasp. The high-ranking members have the privilege of receiving information about a target coin a slight bit earlier than low level members, giving them the edge for their experience level. This not only increases the chances of success for the scam, but also allows experienced members to hoard the asset on a much cheaper price valuation.

Majority of the operating groups have their overall structure defined though an affiliation mechanism. Member can increase their level, by adding more members to the group. The ranking is directly proportional to the number of new members recruited into the scamming group. However, the groups with the hierarchical structure defined usually involve only two levels of ranking, the VIPs and the low-level workers. To be a part of these groups, interested members are usually required to submit Bitcoin (BTC) cryptocurrency from around 0.01 BTC to even 0.1 BTC, pledging their allegiance with the group’s purpose.

Understanding crypto pump-and-dump signals

The operation of crypto pump-and-dump is usually initialized with a pumping signal, the pumping signal is a sort of communication method, which involves spreading fake fruitful news and status information about the target coin, urging and baiting individuals into buying the target cryptocurrency, inflating its price artificially, because of the increase in demand for it. Following the pumping phase comes the dumping phase, in which members of the group start to sell their bought assets at the inflated price, generating significant amounts of profits in return.

Generating the pump-and-dump signals generally falls into the hands of two different types of groups who are active on chatting platforms like Discord and Telegram. The first type is called ‘Transparent group’ which are not shy of expressing their intentions to perform pump-and-dump operations and are quite open with their message. The second type of group is called an ‘Obscure group’ that intentionally hide their intentions of pump-and-dump operations and because they are not allowed to say anything regarding to pump-and-dump, it leads to some level of uncertainty for individuals who are a part of the talks.

As for broadcasting, there are four different ways that pump-and-dump signals are spread through communication platforms. The following are:

  1. Information and How-To Segments: These are two segments that act based on automated news board. The two segments have individual spaces with each of the spaces containing a limited number of communication messages. Information regarding the groups’ regulations, status and other questions asked frequently are usually a part of the information segment, while guidance information regarding the cryptocurrency space and tutorials about pump-and-dump operations are a part of the How-to segments.
  2. Signals: In this segment, only the group administrators have the authority to access and post, basically being a sort of centralized space, in which the pump signals can be found. Group admins discuss future pump-and-dump activities in the first space and exchange trade tactics in the second space.
  3. Invitation: In this segment, the automated task-oriented bots reside. Bots can be utilized to not only generate new user referral links but are also used to track the number of new users that a member has successfully managed to convince to join using their referral link.
  4. Discussion: And finally, this segment consists of active members of the group who communicate with each other across different spaces, with each space being devoted to a certain topic or subject matter.

The working of crypto pump-and-dump operations.

Different sort of crypto pump-and-dump groups actively present online are operating on different stages. The most active groups are working on pump-and-dump operations every single day, while normally active groups are involved in pump-and-dump activities which can last a week or two. Some of these groups are looking out for the market, trying to seize the opportunity of a good market situation.

Now to see if there are any actual profit surround pump-and-dump operations. Pump-and-dump operations do provide opportunists to make some quick dimes, because of its nature of pumping the price of an asset right before it is about to face a massive crash, however, one thing to note is that since pump-and-dump operations usually involve unknown coins, there is a chance that a group can be stranded with these unknown coins if they are not able to sell them before the crash.

It is important to understand that nothing can stand forever in the cryptocurrency market, so it is advised to learn about the basics on how cryptocurrencies and their respective markets work, to make sure that the investment does not go into the projects that have been artificially pumped or have an unprofitable end.

The four phases of a crypto pump-and-dump operation

Below mentioned in detail are the main four phases of how cryptocurrency scammers use certain tactics to deceive users present inside of communication platforms, urging and convincing them to invest in coins and projects that original have now value to them.

  1. Spreading of basic instructions and schedule

In the initial phase, the administrators of the group highlight the cryptocurrency exchange to be utilized for the pump-and-dump operation. Administrators also post information regarding schedules that include the initialization time of the operation, while also mentioning if the operation is going to free-for-all (FFA) or based on ranking methodology. In the case of a free-for-all operation, the VIP ranking holders are notified of the operation earlier than others, either during the start of the operation or some time before the operation commences.

  1. Highlighting the target coin

Moments before the initialization of the operation, information regarding the target coin to be inflated is raised, being distributed multiple times. The target coin is obviously shared with VIP members earlier than regular members. The position of the individual in the group is basically used to figure out their importance and priority in the group.

The name of the target coin is usually shared using a cipher graphical image, that only human individuals can decipher in less time. The cipher graphical image technique is mainly used to counter bots who can easily read normal messages using the technology of OCR, therefore, having a much better speed in performing tasks than humans can ever achieve.

OCR basically refers to Optical Character Reader, which is a technology that utilizes systems to trace and extract valuable text from image files. The OCR scans an image using either a camera or internal systems, and then with the power of artificial intelligence, it starts to read and extract certain text from the image. This is useful since images cannot be read using simple text editor programs.

  1. Attracting and Influencing Investors

After the cipher image is successfully deciphered, the pump-and-dump operation kicks in with the group members starting to take control over the market, purchasing and accumulating the target coin at a very low rate.

The administrator posts a news or message, directing every member of the group to spread the fake information about the increase of the target coin’s price valuation. The fake valuation messages are quickly spread online via communication platforms, social media platforms and many forums, as group members try to lure in investors who carry the “fear of missing out” mentality and are easily influenced by news online.

The lured investors are then attracted to the rise in value and invest their precious earnings into the target coins, buying them from the group members at inflated prices, leading to generation of massive amounts of profit.

  1. Dump Phase

After the pumping phase is complete the scammers leave off with the profits and the investors are stuck with coins that have no value to them. Soon the original market of the target coin crashes, leading to investors with serious amounts of financial loss. Thus, completing the pump-and-dump operation.

Identifying crypto pump-and-dump operations

Since details around the target coin to be inflated is usually spread across communication platforms like Discord and Telegram, the question arsis if these types of operations are legal or not. By reading the details above, it obviously looks like an illegal act, which is true in the case of stock markets, however the situation with the cryptocurrency market is very much different.

Because of lack of regulations, majority of the cryptocurrencies operating globally are not considered to be counted as securities, which means that the state of the crypto space is kind of stuck in a sort of loop, where it is difficult to determine the legal nature of the cryptocurrency operations. Looking at it again, pump-and-dump operations might seem to be illegal, however since these operations are technically not subject to any active laws surround the crypto space, so they are somehow operating on a legal status, despite having the intention of using unfair means to extract precious investments from users unaware of the scheme in the background.

Now, the big question comes into play about how individuals can identify a pump-and-dump operation. Being able to determine the nature of the activity of an asset in a market is a very important and money-saving trait for investors to have, to protect them from such scamming events.

There might be no obvious signs surrounding a pump-and-dump operation, but investors are advised not to follow a sudden hype regarding a certain project or unknown token, as it may be a big sign of a pump-and-dump scheme. Investors should have patience and should properly use evaluation techniques to figure out the true intentions behind project’s existence in the space, before performing any significant investment.

A sign of a pump-and-dump operation is the sudden increase of price valuation of a crypto in a very short amount of time. This needs to be carefully checked, especially in the case of a crypto that is not much popular, is unknown or is not easily recognized by traders.

Another thing to watch out is certain influencers or famous people talking about a certain cryptocurrency, praising its existence and value. It is important to figure out and understand their true intentions as to why they are supporting that certain crypto, because majority of these celebrities have minimal knowledge about cryptos and can often be paid to promote currencies, even if they are not aware behind the true intentions of the project themselves.

Engaging and being active in a community is also way of not only gaining knowledge about a financial market, but also effectively performing trades within it. There are many positive communities surrounding the cryptocurrency space that can be reached out. Good community members are always ready to highlight any positive or negative traits about a certain crypto asset or project. Although they may not always be right, but they are surely thoughtful of only the positive side of trade. This can help to make better decisions regarding investment strategies.


In conclusion, investors should take their time to study, learn and become skilled enough to highlight pump-and-dump operations and before making any big moves, they should consider researching about projects and assets, to figure out their true intentions of existence and make better decisions in terms of performing investments that are genuinely profitable to them and fall under legal conditions and regulations.

Dodging operations like pump-and-dump when investing requires quite a bit of knowledge, so it is advised to study, carefully select a plan and then put heart and soul to it, instead of getting distracted by certain suspicious schemes. Using this procedure will make sure that the investment is only done on crypto assets and projects that are quite well known within the cryptocurrency space and the community that resides within it. If someone is to fall into the wrong direction, then it will certainly lead to significant losses, depending upon the amount of the investment made. There will always be bad players in the market, so one should effectively identify them and watch out for themselves.

AI Trading produces top quality content for crypto companies. We provide brand exposure for hundreds of companies. All of our clients appreciate our services. If you have any questions you may contact us. Cryptocurrencies and Digital tokens are highly volatile, conduct your own research before making any investment decisions. Some of the posts on this website are guest posts or paid posts that are not written by our authors and the views expressed in them do not reflect the views of this website. Herald Sheets is not responsible for the content, accuracy, quality, advertising, products or any other content posted on the site. Read full terms and conditions / disclaimer.

Nathan Ferguson

By Nathan Ferguson

Nathan Ferguson is a talented crypto analyst and writer at Herald Sheets, dedicated to delivering comprehensive news and insights on the ever-evolving digital currency landscape. With a strong background in finance and technology, Nathan's expertise shines through in his well-researched articles and thought-provoking analysis. He holds a degree in Economics from the University of Chicago, and his passion for cryptocurrency drives him to stay up-to-date with the latest industry trends and developments.