A number of crypto-traders have been caught red handed discussing pump and dump manipulations of tiny coins with a market cap of around $1-$5 million.
Their apparent plan was to corner the market by buying around 25% of, in this case, Haven (XHV), a new coin that started trading only in the past two days.
Then, they claim they’d be able to control price movements, raising it and crashing it as they please. They do not discuss in detail how, but the first task was to get it on some mid-cap exchange.
XVH at that point was traded on such a small exchange even some of the participants had never heard of it. One of them commented he/she would not put a penny in that specific exchange, tradeogre.
A participant commented that he could easily get it listed on Bitfinex. Most however seemingly wanted it to be on Kucoin, a somewhat small exchange, but Kucoin had asked too much money for listing.
Once they cornered the market, they then planned to
, to “promote” it, with the same above participant claiming he could maybe even get it on Forbes/Huffington Post. shill, not a nice word
By the end of it, some of them agreed to put in around 10 BTC each, currently worth $80,000, with the coin’s trading volumes currently at around one million dollars.
It does appear there may have been some front-running even within the group. As you can see there, early on price rose, with some participants perhaps buying straight in rather than waiting for everyone to be organized.
Price then kind of crashed, with quite a bit of volatility for its first day, but the price movement does appear to involve fairly small amounts.
That may be because the published discussion was about organizing the manipulation. The discussion thus ends with them all agreeing to carry it out, with one of them stating 5 btc was on its way to the organizer’s Coinbase escrow.
What a Coinbase escrow is they do not explain. Coinbase itself does not provide any escrow as far as we are aware. It appears rather to be the case they agree one of them is to hold the pooled btc, and the one that is to hold them is
stupid enough to (not nice word) apparently holding them on Coinbase.
That’s where the published discussion ends, so whether they did in fact carry out any manipulation is unclear at this stage. Nor is it clear whether this would be an illegal crime under perhaps conspiracy to manipulate or to pump and dump.
CFTC does have some jurisdiction over coins as they consider them to be commodities, while SEC has exercised jurisdiction over tokens.
CFTC can probably find a law somewhere if they wanted to take action, with them recently in effect doing just so, stating:
“While its regulatory oversight authority over commodity cash markets is limited, the CFTC maintains general anti-fraud and manipulation enforcement authority over virtual currency cash markets as a commodity in interstate commerce.
In addition, some of the coin exchanges are taking measures to identify and block accounts that participate in pump-and-dump activities.”
Whether there is an actual crime here, however, is of course not for us to say. The person that revealed it claimed he sent it to the SEC and the FBI, as well as “other federal authorities.” Whether he did send it to CFTC is unclear.
The person who revealed it, going by the name of CryptoMedication, was himself in the group, but presumably did not participate in this case, if at all.
There appears to be a bigger web here, seemingly revolving around what appears to be a trading newsletter called Bitcoin Bravado.
CryptoMedication apparently wrote for them, and was in their “team,” but there appears to have been a spat of sorts. CryptoMedication seemingly took most offense by the suggestion that his twitter followers were fake. That apparently triggered him, so he published all those apparent screenshots.
The veracity of the screenshots has not been denied as far as we are aware, but Bravado has denied they have any connection to that specific group, stating:
“Though a few of the members shown in those telegram chats have been friends and supporters to Bitcoin Bravado, they write none of the content and have no ownership or equity in the company.”
What we are seeing here is an apparent sub-culture of relatively unknown mainly traders who swim mostly in the tiny cap world of cryptos.
They’re taking big risks, as attempts to corner the market can lead to bankruptcy. But presumably sometime it pays off, potentially at the expense of unaware onlookers.
Yet those onlookers should be very aware of the significant risk they’re taking in playing around with such tiny coins because their very small market cap makes them stupendously easy to manipulate.
In contrast to the big boys, such as eth and btc which have a combined trading volume of more than $10 billion in the past 24 hours. Making manipulation very difficult due to the significant liquidity.