Pump and dump

Beware of Bing AI chat and ChatGPT pump-and-dump tokens — Watch The Market Report live

On this week’s episode of The Market Report, Cointelegraph’s resident experts discuss ChatGPT pump-and-dump tokens and why you should be cautious.

This week on The Market Report, the resident experts at Cointelegraph discuss dozens of pump-and-dump tokens purporting to be related to ChatGPT and Bing AI chat.

We will be doing things a little differently this week since our handsome and charming host, Joe Hall, will be somewhere over the Atlantic during the livestream and will not be able to join us. Not to worry, though, as our resident experts Marcel Pechman and Sam Bourgi are here, as always, to break down the latest news in the markets.

Bitcoin bulls ignore recent regulatory FUD by aiming to flip $25K to support

The New York State Department of Financial Services ordered Paxos to “cease minting” the Paxos-issued Binance USD (BUSD) dollar-pegged stablecoin. On Feb. 16, a bank account controlled by Binance.US moved over $400 million to the trading firm Merit Peak, which is supposedly an independent entity also controlled by Binance CEO Changpeng Zhao. This and other bad news in the crypto market have not seemed to deter Bitcoin (BTC) from gaining 15% since Feb. 13. In fact, both retail and pro traders are showing signs of confidence. We explain why that is the case and why the odds favor a continuation of the current rally.

BingChatGPT ‘pump-and-dump’ tokens emerging by the dozen: PeckShield

Blockchain security firm PeckShield has raised the alarm after finding dozens of tokens purporting to be related to artificial intelligence (AI) powered chatbot ChatGPT. Some of these tokens have already lost most of their value, if not all, in what is often referred to as a “pump-and-dump” scheme or a “rug pull.” A pump-and-dump scheme typically involves the creators orchestrating a campaign of misleading statements and hype to persuade investors into purchasing tokens, then secretly selling their stake in the scheme when prices go up. You might think it interesting to check out a token supposedly related to the recent hype involving Bing AI chat and ChatGPT, but we’re here to tell you to be cautious when getting financially involved with any of them. We also explain some basic ways you can keep yourself safe from such scams.

Bitcoin active addresses ‘concern’ analyst despite 50% BTC price gains

Bitcoin still lacks the on-chain volume and active address increases that characterize bull markets, research warns. In a frank appraisal of the 2023 BTC price rebound, on-chain analytics platform CryptoQuant warned that Bitcoin might be weaker than it seems. Many analysts seem to be very suspicious about the recent bullish trend in the market, and we’re here to explain why.

Our experts cover these and other developing stories, so make sure you tune in to stay up-to-date on the latest in the world of crypto.

Do you have a question about a coin or topic not covered here? Don’t worry — join the YouTube chat room and write your questions there. The person with the most interesting comment or question will have a chance to win a one-month subscription to Markets Pro worth $100.

The Market Report streams live every Tuesday at 12:00 pm ET (5:00 pm UTC), so be sure to head on over to the Cointelegraph Markets & Research YouTube page and smash those Like and Subscribe buttons for all our future videos and updates.

BingChatGPT ‘pump and dump’ tokens emerging by the dozen: PeckShield

Blockchain security firm PeckShield on Twitter said it has found dozens of pump-and-dump tokens purporting to be related to ChatGPT.

Blockchain security firm PeckShield has raised the alarm after finding dozens of tokens purporting to be related to artificial intelligence (AI) powered chatbot ChatGPT.

“In a Feb. 20 post, the firm revealed at least three “BingChatGPT” tokens appear to be part of honeypot schemes — a smart contract that tricks a user into sending Ether (ETH), which the attacker then traps and retrieves.

Some of the addresses reportedly associated with the BingChatGPT tokens. Source: PeckShield

According to PeckShield, at least two of the tokens identified have already lost nearly 100% of their value, while a third is at a 65% loss — in what is often referred to as a “pump and dump” scheme or “rug pull.”

A pump-and-dump scheme typically involves the creators orchestrating a campaign of misleading statements and hype to persuade investors into purchasing tokens, then secretly selling their stake in the scheme when prices go up. 

At least one of the bad actors behind the tokens, “Deployer 0xb583,” is responsible for creating “dozens of tokens with a pump & dump scheme,” said PeckShield.

While PeckShield did not explain why the bad actors are using the name BingChatGPT for their tokens, the scammers could be trying to take advantage of the Feb. 7 announcement that OpenAI’s ChatGPT tech is being integrated into Bing and Microsoft’s Edge web browser.

The token’s name might be an attempt to trick victims into thinking they are somehow related to Microsoft and take advantage of the hype around AI chatbots.

Blockchain analytics firm Chainalysis recently noted in a Feb. 16 report that nearly 10,000 new tokens launched in 2022 had all the on-chain characteristics of being pump-and-dump schemes.

According to the Blockchain analytics firm, 1.1 million tokens were launched last year, but only 40,521 had an “impact on the crypto ecosystem,”with at least ten swaps over four consecutive days of trading in the week following their launch.

An example of a crypto pump and dump scheme. Source: Chainalysis

“Of the 40,521 tokens launched in 2022 that gained sufficient traction to be worth analyzing, 9,902, or 24%, saw a price decline in the first week indicative of possible pump and dump activity,” the firm said. 

Related: Wormhole hacker moves another $46M of stolen funds

While a price drop on its own is not an indication of wrongdoing on the part of token creators, the firm noted that it examined 25 in particular and found “they were almost certainly designed for a pump and dump,” with malicious honeypot code that prevents new buyers from selling the token.

Wash trading will cause crypto’s next implosion: Mark Cuban

The majority of centralized exchange volume is fake, according to the billionaire investor and Dallas Mavericks owner.

Crypto token wash trading on centralized exchanges will be the cause of the next crypto “implosion,” according to billionaire Dallas Mavericks owner and crypto investor Mark Cuban.

In an interview with The Street on Jan. 5, the billionaire investor opined that 2023 will not be short of crypto scandals following the numerous fiascos that rocked 2022.

Cuban, who has backed several crypto and Web3 startups, said he believes the next biggest thing to impact the industry will be “the discovery and removal of wash trades on central exchanges.”

“There are supposedly tens of millions of dollars in trades and liquidity for tokens that have very little utilization,” he said before adding, “I don’t see how they can be that liquid.”

Mark Cuban has backed several crypto startups. Source: American Broadcasting Company

Wash trading, which is illegal under U.S. law, is a process whereby a trader or bot buys and sells the same crypto asset to feed misleading information to the market.

The goal is to artificially inflate volumes so that retail traders jump on the bandwagon and push prices up. In essence, it is a pump-and-dump scheme.

Cuban said he was just making a prediction, adding “I don’t have any specifics to offer to support my guess.”

As much as 70% of the volume on unregulated exchanges is wash trading, according to a December report by the National Bureau of Economic Research (NBER).

Researchers used statistical and behavioral patterns to determine which transactions were legitimate and which ones were spurious.

Furthermore, a 2022 study by Forbes on 157 centralized exchanges found that more than half the Bitcoin trade volumes were fake.

Related: Mark Cuban to Bill Maher: ‘If you have gold, you’re dumb as fuck… Just get Bitcoin.’

Wash trading isn’t just limited to centralized exchanges, however. On Jan. 5, Quantum Economics CEO and former eToro senior market analyst Mati Greenspan said that 42% of all NFT volume is wash traded.

He added that wash trading is also used to harvest tax losses, making it appear (to the taxman) that there has been a greater loss than in reality.

Serum price soars 140% in one week amid FTX ‘exit pump’ fears

FTX exposure risk has not stopped Serum price from a massive rally despite major cryptocurrency exchanges delisting SRM.

Serum, a “decentralized exchange” on the Solana blockchain, has performed exceptionally well in terms of its SRM token price, despite it ties to the defunct FTX exchange.

SRM price up 140% in one week

On the daily chart, the SRM/USD pair has gained 140% in the last seven days, hitting $0.319 on Nov. 21 versus $0.177 on Nov. 14.

This pushed the circulating market cap to about $73 million and “fully diluted market cap,” the market cap if the maximum supply was in circulation, to nearly $2.8 billion.

SRM/USD daily price chart. Source: TradingView

“Closer to zero”

SRM price rallied despite the ongoing delisting of Serum trading pairs across major cryptocurrency exchanges, including Binance, OKEx, Gate.io, and Phemex, thus raising fears about an ongoing “exit pump.”

Exit pumps are when large investors pump the token’s price in a low-liquidity environment to attract new buyers, only to then dump their entire holdings on amateur investors as witnessed with numerous pump-and-dump schemes.

Distrust in Serum has grown due to its troubling exposure to FTX. In a Nov. 11 bankruptcy filing, a leaked balance sheet revealed that FTX had $8 billion in liabilities against a reserve mostly comprised of illiquid assets, including SRM.

Notably, FTX showed about $5.4 billion worth of SRM tokens in its reserves, or almost 97% of Serum’s total market cap, including the circulating and fully-diluted supply.

As a result, the token’s exposure to FTX has raised the possibility of a major selloff. 

“If FTX had attempted to sell them into the market over the course of a week or month or year, it would have swamped the market and crashed the price,” noted Matt Levine, Bloomberg’s Opinion Columnist, adding:

“Perhaps it could have gotten a few hundred million dollars for them. But I think a realistic valuation of that huge stash of Serum would be closer to zero. That is not a comment on Serum; it’s a comment on the size of the stash.”

Serum community forks to cut ties with FTX

The SRM price rally in the past seven days coincided with efforts to distance Serum from FTX.

Serum’s key backers threw their weight behind an emergency “community fork” after wallets associated with FTX saw suspicious outflows worth $266.3 million on Nov. 11.

Brain Long, one of the popular validators on Solana, noted that the fork had renewed the market’s sentiment in SRM.

Still, Serum’s fork has failed to attract fresh capital toward its liquidity pools. As of Nov. 21, the total-value-locked inside Serum’s reserves was a mere 33,900 SOL compared to 3.3 million SOL at the start of the month.

Serum total-value-locked as of Nov. 21. Source: Defi Llama

Serum price collapse ahead?

From a technical perspective, SRM stares at the possibility of undergoing massive selloffs in the coming weeks.

The bearish argument stems from a descending triangle setup on its daily chart, which suggests more declines ahead if coupled with the previous SRM price downtrend. Descending Triangle patterns are trend continuation setups.

Related: Not just FTX Token: Solana price nukes 40% along with other ‘Sam coins’

Hence, SRM now eyes a potential breakdown below the triangle’s lower trendline near $0.234. A successful break below the said support would risk sending the price toward the level at length equal to the maximum distance between the triangle’s upper and lower trendline.

In other words, SRM price risks crashing to $0.10, or by 65%, by December 2022.

Conversely, a breakout above the triangle’s upper trendline near $0.30 could have the token test its 50-day exponential moving average (50-day EMA; the red wave) at $0.56 as its next key upside target.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Alameda on the radar of BitDAO community for alleged dump of BIT tokens

Bybit co-founder Ben Zhou stated that while no wrong-doing is confirmed, the BitDAO community would like to see proof of fund from Alameda.

The recent concerns related to the volatility of FTX Token (FTT) seeped into FTX CEO Sam Bankman-Fried’s other business operation, Alameda Research, as the BitDAO community requested information about Alameda’s BitDao (BIT) holding commitment.

On Nov. 2, 2021, BitDAO swapped 100 million BIT tokens with Alameda in exchange for 3,362,315 FTT tokens with a public commitment to hold each other’s tokens for three years, so until Nov. 2, 2024. Given the rising uncertainties and speculations, the BitDAO community was quick to react to the sudden fall of BIT prices on Nov. 8, 2022, suspecting Alameda of dumping the BIT tokens and breaching the three-year mutual no-sale public commitment.

BIT market price chart (1 day). Source: CoinMarketCap

To narrow down the reasons for BIT’s price drop, the BitDAO community requested an allowance for monitoring and verifying Alameda’s commitment to holding BIT tokens. BitDAO provided proof of honoring its side of the commitment by sharing an address that shows BitDAO Treasury holding all 3,362,315 FTT tokens.

In return, the community gave Alameda a deadline of 24 hours to prove its commitment, requesting that:

“The preferred method is for Alameda to transfer the 100 million $BIT tokens to an on-chain (non-exchange) address for the BitDAO community to verify, and hold until the end of the agreement.”

Ben Zhou, the co-founder of crypto exchange Bybit, summed up the matter by stating that while nothing is confirmed, the BitDAO community wants to confirm proof of funds from Alameda.

Standing up against the accusation, Caroline Ellison, the CEO at Alameda Research, confirmed no wrongdoing from the company’s end and promised to share the proof of funds, telling Zhou that:

“Busy at the moment but that wasn’t us, will get you proof of funds when things calm down.”

BitDAO’s proposal to request for Alameda’s funds proof was accompanied by vague warning:

“If this request is not fulfilled, and if sufficient alternative proof or response is not provided, it will be up to the BitDAO community to decide (vote, or any other emergency action) how to deal with the $FTT in the BitDAO Treasury.”

Alex Svanevik, the CEO of blockchain analytics platform Nansen, investigated the on-chain data to find that Mirana Ventures — Bybit’s venture capital arm — withdrew 100 million BIT from FTX. However, he advised the crypto community not to fall for speculations, as withdrawing funds doesn’t mean Alameda is selling.

Related: Coinbase, Alameda-backed Mara launches African crypto wallet service

From Nov. 6, numerous FTX users faced problems while withdrawing their funds from the exchanges, such as delays and failures.

FTX addressed the concerns raised by investors by highlighting the smooth operation of the matching engine. However, the exchange agreed on delays with Bitcoin (BTC) withdrawals due to limited node throughput.

In addition, users facing delays in stablecoin withdrawals were told that withdrawal speeds would get back to normal after banks resumed operations during the weekdays.

‘I’ve done nothing wrong’ — Lark Davis denies ‘pump-and-dump’ allegations

Davis claimed he received nothing for free from the projects it’s alleged he profited from, and the amounts he sold weren’t enough to “dump the price.”

Crypto influencer Lark Davis has refuted new allegations from Twitter “on-chain sleuth” ZachXBT of shilling “low cap projects” to his audience “just to dump them shortly after.”

Davis was responding to a Twitter thread posted by Zach on Sept. 29, containing allegations that he profited over $1.2 million through selling tokens from crypto projects which he was allegedly paid to promote without disclosing.

In a 17-part thread, Zach pointed to eight examples of what is supposedly Davis’ crypto wallet receiving tokens from new crypto projects, with Davis subsequently tweeting or posting a video on them, and then selling the tokens shortly after.

Speaking to Cointelegraph, Zach said he received requests from multiple people who lost money on the tokens shared by Davis asking to “take a closer look” at him.

“Lark managed to dump with size on low cap projects time after time,” Zach said, adding they’ve investigated other crypto influencers, but the alleged amount was “never at this magnitude.”

Zach alleged in the thread that the largest gain to Davis came from receiving 120,000 SHOPX tokens, with Davis tweeting hours later about the project whilst apparently simultaneously selling the tokens, gaining $435,000.

This example along with seven others Zach presented purportedly shows Davis making over $1.2 million in a similar pattern.

“Participating in seed rounds & sharing projects you genuinely like is completely fine as long as it’s done in a transparent manner,” Zach tweeted, adding:

“This is not the case as Lark has a pattern of dumping his discounted launchpad bags right after shills across YT (YouTube), Twitter, & [his] newsletter.”

Cointelegraph requested comment from Davis and was directed to a series of tweets posted late on Sept. 29 in which Davis calls the allegations made by Zach “ridiculous” and provided a response to each example Zach alleged he profited from.

Related: ‘Far too easy’ — Crypto researcher’s fake Ponzi raises $100K in hours

“I got nothing for free,” Davis tweeted to his over one million followers, adding his token sale investments are “always disclosed” on his YouTube channel of 485,000 subscribers and shared with his followers “well before the launch.”

Davis added he was following an investing strategy he teaches, selling the tokens upon launch, which he claims is a common investing practice for token sales. Davis said the amounts he sold were “nowhere near enough to dump the price” of the tokens.

“I teach this concept frequently to you all, none of this should be a surprise if you have been paying attention,” he tweeted. “What you choose to do with my opinions is completely up to you.”

‘I’ve done nothing wrong’ — Lark Davis denies ‘pump-and-dump’ allegations

Davis claimed he received nothing for free from the projects it’s alleged he profited from, and the amounts he sold weren’t enough to “dump the price.”

Crypto influencer Lark Davis has refuted new allegations from Twitter on-chain sleuth ZachXBT of shilling “low cap projects” to his audience “just to dump them shortly after.”

Davis was responding to a Twitter thread posted by Zach on Sept. 29, containing allegations that he profited over $1.2 million through selling tokens from crypto projects which he was allegedly paid to promote without disclosing.

In a 17-part thread, Zach pointed to eight examples of what is supposedly Davis’ crypto wallet receiving tokens from new crypto projects, with Davis subsequently tweeting or posting a video on them and then selling the tokens shortly after.

Speaking to Cointelegraph, Zach said he received requests from multiple people who lost money on the tokens shared by Davis asking to “take a closer look” at him.

“Lark managed to dump with size on low cap projects time after time,” Zach said, adding they’ve investigated other crypto influencers, but the alleged amount was “never at this magnitude.”

Zach alleged in the thread that the largest gain to Davis came from receiving 120,000 SHOPX tokens, with Davis tweeting hours later about the project while apparently simultaneously selling the tokens, gaining $435,000.

This example along with seven others Zach presented purportedly shows Davis making over $1.2 million in a similar pattern.

“Participating in seed rounds & sharing projects you genuinely like is completely fine as long as it’s done in a transparent manner,” Zach tweeted, adding:

“This is not the case as Lark has a pattern of dumping his discounted launchpad bags right after shills across YT (YouTube), Twitter, & [his] newsletter.”

Cointelegraph requested comment from Davis and was directed to a series of tweets posted late on Sept. 29 in which Davis calls the allegations made by Zach “ridiculous” and provided a response to each example Zach alleged he profited from.

Related: ‘Far too easy’ — Crypto researcher’s fake Ponzi raises $100K in hours

“I got nothing for free,” Davis tweeted to his over one million followers, adding his token sale investments are “always disclosed” on his YouTube channel of 485,000 subscribers and shared with his followers “well before the launch.”

Davis added he was following an investing strategy he teaches, selling the tokens upon launch, which he claims is a common investing practice for token sales. Davis said the amounts he sold were “nowhere near enough to dump the price” of the tokens.

“I teach this concept frequently to you all, none of this should be a surprise if you have been paying attention,” he tweeted. “What you choose to do with my opinions is completely up to you.”

How to identify and avoid a crypto pump-and-dump scheme?

Pump-and-dump in crypto is an orchestrated fraud that involves misleading investors into purchasing artificially inflated tokens — typically marketed and hyped by paying celebrities and social influencers.

Educating oneself about the crypto ecosystem is crucial for investors to pursue during a bear market while awaiting a bull cycle. That being said, having a good understanding of crypto investment entails keeping an eye out for fraudulent projects that threaten to drain assets overnight, a.k.a. pump-and-dump schemes.

Pump-and-dump in crypto is an orchestrated fraud that involves misleading investors into purchasing artificially inflated tokens — typically marketed and hyped by paying celebrities and social influencers. SafeMoon token is one of the most prominent examples of an alleged pump-and-dump scheme involving A-list celebrities, including Nick Carter, Soulja Boy, Lil Yachty and YouTubers Jake Paul and Ben Phillips.

Once the investors have purchased tokens at inflated prices, the people owning the biggest pile of tokens sell out, resulting in an immediate crash in the token’s prices. While fraudsters disguise pump-and-dump schemes under the pretext of creating the next batch of crypto millionaires, knowledgable investors have the upper hand in identifying and avoiding their involvement.

Pump-and-dump schemes are usually accompanied by false promises around three broad categories — solving real-world use cases, guaranteed exorbitant returns and unwithered backing from celebrities and influencers.

The long-term success of a cryptocurrency is heavily dependent on the use cases it serves. As a result, people supporting pump-and-dump projects often suffice their involvement by highlighting the use cases the token aims to serve. In addition, such schemes typically rope in celebrities by upfront payments in cash and the project’s in-house tokens. 

Celebrities then market the fraudulent tokens to trusting fans, usually with promises of high investment returns. In the case of SafeMoon, celebrities were accused of a slow rug pull, implying a slow sell-off of holdings as the trading volume from retail investors remained inflated.

Binance, the biggest crypto exchange in terms of trading volume, also warned investors from taking investment advice from celebrities and influencers.

In the next bull cycle, traditional and crypto investors across the globe will amp up efforts to recoup losses from the ongoing bear market. Knowing this information, fraudsters will try and find opportunities to dupe unwary investors by presenting unrealistic gains. As a result, do your own research (DYOR) stands as one of the best pieces of advice in crypto.

Related: Sygnia CEO criticizes Elon Musk for alleged Bitcoin pump and dump

Elon Musk was recently accused of manipulating crypto prices by prominent South African billionaire businesswoman Magda Wierzycka.

Wierzycka believes that Musk’s social media activity and its implications on the price of Bitcoin (BTC) should have made him the subject of an investigation by the U.S. Securities and Exchange Commission. She believes that Musk knowingly pumped up the price of Bitcoin via tweets, including those mentioning Tesla’s $1.5 billion BTC purchase, then “sold a big part of his exposure at the peak.”

Voyager token skyrockets as VGX pump scheme touted

Unknown crypto venture firm MetaFormLabs has initiated a campaign to pump VGX as part of a proposed Voyager rescue package.

The native token for the embattled crypto brokerage Voyager Digital has skyrocketed in what seems to be a new effort to inflate its price seemingly inspired by the recent “CEL short squeeze.”

On Wednesday, Voyager’s VGX token surged 178% to hit an intraday high of $0.891 before falling back to around $0.559, according to CoinGecko. It had regained ground back up to $0.717 at the time of writing. 

The price rise has coincided with the appearance of a Twitter hashtag called #PumpVGXJuly18, as well as the formation of a Telegram group called the “Voyager Community Recovery Channel,” which had more than 2,100 members at the time of writing.

The token has gained more than 400% since the beginning of the week as speculators appear to be jumping aboard the latest quick buck bandwagon.

This week’s VGX pump is a reversal of a steady downtrend for the crypto token this year, losing almost 80% since the beginning of 2022. It is also down 94.3% since its January 2018 all-time high of $12.47.

On July 6, Voyager Digital announced its restructuring plan, which would include issuing Voyager tokens to customers that had suffered losses following its suspension of trading earlier in the month. The same day, the company filed for Chapter 11 bankruptcy in New York, citing liquidity issues arising from Three Arrows Capital’s (3AC) outstanding debts.

The latest twist in the saga came when a federal judge in New York froze the remaining assets of 3AC on Tuesda. Another part of the restructuring plan includes any recovery of assets from 3AC, which could also partly explain the increase in the perceived value of the VGX tokens.

Unknown crypto venture firm MetaFormLabs, which initiated the move on Twitter to pump VGX on July 9, has pledged to rescue Voyager through this means. On Wednesday, the firm detailed its token price target, and the amounts pledged for the rescue package:

“We have set a new target range of 5USD-8USD. Currently, we have 50,000,000USD internally and 67,000,000USD pledged by well-known crypto enthusiasts.”

By Thursday, it claimed to have $135 million in funds for the rescue package, which will be announced in full on July 18, coinciding with its token pump peak plans.

Following the initial pump, which began on Wednesday as prices lifted off from $0.15, MetaFormLabs asserted that this was nothing to do with them:

“Where there’s green there’s vultures that prey for low entries. #PumpVGXJuly18 will go ahead as planned on July 18 @ 2pm PST. Today’s movement wasn’t us, we’ve not even begun yet.”

The pump scheme has been met with a healthy dose of skepticism from the crypto community on Twitter.

There was no mention of any bailout plans on Voyager’s official Twitter feed.

Related: Investors lament potentially lost ‘millions’ on Voyager bankruptcy

Cointelegraph reached out to MetaFormLabs for further details in response to their call to do so but had not heard back by the time this article was published.

Meanwhile, VGX was already dumping and had lost 21% from its initial pump yesterday. A similar pump and dump occurred with the newly launched Terra (LUNA) tokens, which surged above $10 a couple of days after they went live in late May, only to dump to around $2.00 a week later.