Only In a little over a decade, the crypto world has gone from a single currency to millions of coins and assets, each promising a small stake in the next big deal. The challenge for anyone putting their money into this minefield posing as a goldmine is to distinguish the digital treasure from the many, many fraudulent penny stocks of the digital economy. A new study reveals just how pervasive these junk assets have become: About a quarter of the new crypto tokens issued last year, counting only those that gained any value at all, were clear, short-term scams. buyers within a week of their release.
As part of its annual crime report released today, crypto-tracking and blockchain analysis company Chainalysis has released a new study into so-called “pump and dump” scams that use crypto tokens, blockchain-based digital assets that, according to at least in theory, shares in some valuable company or project. In a pump-and-dump scam, the scammer “pumps” the price of an asset they own, often with unwarranted hype, and then sells their entire asset without warning. This causes the value to fall, thus dumping the depreciated asset on the stamps they fraudulently bought. a token, not scammers who manipulate an already existing one for profit.
“Looking at our blockchain data, we realized that the best way we could contribute is by looking at tokens created by a liquidity provider specifically for pump and dump,” says Kim Grauer, Head of Research at Chainalysis. The term “liquidity provider” means the creator or issuer of a token. “There are millions of such tokens. How many are legitimate and how many are fraudulent?
Answer: many of them are scammers. After examining over a million crypto tokens created in 2022, Chainalysis found that only a tiny fraction of them, 9,902, ever convinced anyone to buy them and thus gained any value. Of these, they found that as many as 24 percent were brazen, short-term pump-and-dumps by the creator of the token, dumped within the first week of their sale.
Perhaps even more shocking was the number of serial offenders in this world of token scams. By tracking pump-and-dump profits, Chainalysis tracked how money reaches the crypto wallets of hundreds of serial scammers. They found that 445 people or organizations had more than one short-term pump and dump in the past year. Of these, 23 completed more than 10. One very busy pump and discharge entrepreneur completed at least 264 operations.
Despite the prevalence of these one-week scams and the amount of effort some scammers put into pulling them off repeatedly, Chainalysis found that they were not particularly lucrative. The total revenue (or loss for victims of the scams) was only $30 million, which is just 0.5 percent of the total $5.9 billion fraud revenue that Chainalysis measured for 2022. corrupted by swindlers of the most shameless kind.