ASIC reveals how it infiltrated crypto ‘pump and dump’ Telegram groups

Published at: Dec. 29, 2021

The Australian Securities and Investments Commission (ASIC) has revealed the details of how it took down crypto “pump and dump” Telegram groups back in October.

A pump and dump scheme typically involves using social media to coordinate users to buy large amounts of a thinly traded token to artificially inflate its price. They then cash out with massive gains after other investors, who aren’t in on the scheme, FOMO in on a momentum trade.

The new documents reveal that ASIC has been taking counsel from finance academic and crypto researcher, Talis Putnins since early Oct.

A 38-slide presentation by Putnins to ASIC investigators revealed that pump and dump schemes are cyclical, peaking back during 2018 and again in 2021. The presentation stated that they tend to “correlate with overall market sentiment and prices.”

According to the presentation, there are a number of factors which have changed between 2018 and the time of publication, during Oct 2021. Over a period of six months in 2018, Putnins documented over 355 cases of crypto market manipulation.

He referenced the schemes’ “transparent intention to pump,” and the absence of any “genuine attempt to ignite momentum.” The schemes are “completely out in the open for everyone to see,” the presentation noted.

The presentation detailed the Telegram group “Crypto Binance Trading | Signals & Pumps” Sept 19 pump of fractional algorithmic stablecoin system, Frax Share (FXS), which saw a massive 90% on $65 million volume in less than one minute.

“With our volumes averaging 40 to 80 million $ per pump and peaks reaching up to 450% we are ready to announce our next big pump,” stated a Sept 13 announcement in the group.

“Our main goal for this pump will be to make sure that every single member in our group makes a massive profit. We will also try reaching more than 100 million $ volume in the first few minutes with a very high % gain.”

What's behind pump and dump schemes?

The presentation cited a perceived lack of legal risk, anonymity in forums and encryption as potential reasons for the groups, adding that there is a “perception that crypto is unregulated therefore pumps are legal.”

The new information was revealed in documents which The Australian newspaper was able to access through a freedom of information request. The Australian published the new information on Dec 28.

Last year, Putnins co-authored a paper titled “A New Wolf in Town? Pump-and-Dump Manipulation in Cryptocurrency Markets.”

The report concluded that crypto pump and dumps have created “extreme price distortions of 65 per cent on average, abnormal trading volumes in the millions of dollars, and large wealth transfers between participants”.

On Oct 15, Cointelegraph reported that ASIC had been investigating schemes across crypto and traditional markets operated through social channels such as Twitter, Telegram and Aussie stock chat forum, HotCopper.

At the time, a Telegram account named “ASIC” posted a message on the “ASX Pump Organisation” chat warning its 300 members that the watchdog was “monitoring this platform,” and its members were being investigated.

“Coordinated pumping of shares for profits can be illegal. We can see all trades and have access to trader identities. [...] You run the risk of a criminal record, including fines of more than $1 million and prison time.”

A spokesperson from ASIC told Cointelegraph at the time: “Even where the activity relates to cryptocurrencies/products that may not be financial products under the Corporations Act, the pump-and-dump practice is concerning as it can lead to investor losses and create unnecessary price volatility.”