What is behind pump and dump: how to recognize a fraudulent scheme

Pump and dump is one of the most dangerous fraudulent practices in the crypto industry. This scheme is based on artificially inflating the price of an asset (, which can be either a regular coin or an NFT), to attract inexperienced investors, and then quickly selling it by the organizers. As a result, the price sharply drops, leaving newcomers with losses.

How this deception mechanic works

It all starts with the scheme initiators — usually people with access to large volumes of assets — beginning active coordination. They use social media, forums, and messengers to spread information (often false or greatly exaggerated) about the project. The goal is simple: to create hype and FOMO (fear of missing out) among potential buyers.

As demand grows, the price of the asset begins to rise increasingly rapidly. This attracts even more people, as they see that “everyone is investing in this coin.” At the peak of popularity, when the wave of excitement reaches its maximum, the organizers of the scheme begin to sell off their positions en masse. This (dump) happens so quickly that most later investors simply do not have time to exit and lose their funds.

Why this is dangerous and illegal

Pump and dump is not just an unethical practice, but also a criminal offense in most jurisdictions. The organizers of the scheme deliberately mislead investors to profit at their expense. Such manipulations undermine trust in the cryptocurrency market, freeze the capital of newcomers, and hinder the development of a healthy ecosystem.

How to protect yourself

The main rule is to conduct your own research (DYOR). Before investing in any asset, check its history, team, real use, and price growth authenticity. Avoid FOMO and recommendations from anonymous groups. Invest only in projects that have a clear development strategy and real value, not in “quick money.”