Pump and Dump

Pump and dump is a form of market manipulation involving coordinated buying to artificially inflate an asset's price, creating false appearance of demand and upward momentum, followed by orchestrated selling by insiders once retail investors are lured in, causing price collapse and losses for late buyers.

Pump and dump schemes typically unfold in phases: accumulation (insiders quietly buy at low prices), pump (coordinated buying and promotional campaigns through social media, Telegram groups, or paid influencers to drive FOMO), and dump (insiders sell holdings into retail demand, triggering sharp price collapse). Red flag indicators include sudden unexplained price spikes, aggressive social media promotion with exaggerated claims, influencer endorsements without disclosure, coordinated "LFG" and "to the moon" language, and wallet analysis showing large holders preparing to sell.

Pump and dump activity is explicitly illegal in traditional securities markets and increasingly prosecuted in crypto markets by the SEC, CFTC, and DOJ. Vulnerable targets include low market cap tokens, newly listed assets with thin liquidity, and meme coins with community-driven narratives. Blockchain transparency enables detection through on-chain analysis of coordinated wallet activity, insider accumulation patterns, and sudden large transfers to exchanges preceding dumps. Professionals investigating pump and dump schemes should analyze social media coordination, wallet clustering, trading volume anomalies, and timing between promotional activity and insider sells.