If you suffer from FOMO (fear of missing out) and enjoy getting crypto and stock tips on social media, you could be in danger of falling victim to a scam referred to as a “pump and dump” scheme.
Pump and dump schemes are not a new tactic, but they have recently made headlines following allegations that influencer Kim Kardashian and other celebrities were somehow involved in one.
Kardashian, as well as Floyd Mayweather Jr and Paul Pierce, are currently being sued by EthereumMax crypto-currency investors who claim the celebs worked with EthereumMax to “misleadingly promote and sell” the digital currency.
What is a pump and dump?
EthereumMax (which has no links to Ethereum itself) is not the only cryptocurrency where claims of pump and dump have been made. Just a few years ago, Capital.com wrote about how some in the crypto community were convinced that XRP and Ripple were a scam.
According to Adam Morris, co-founder of Crypto Head, “In the world of cryptocurrency, pump and dump schemes are when an investor or group of investors will spread false or misleading information about their coin or one they hold a large stake in, to convince unsuspecting investors to buy into the coin skyrocketing the price of it.”
Morris added, “Once the coin is effectively ‘pumped’, the originators of the scam will sell or ‘dump’ their coins whilst people are still buying it, making large profits but also creating substantial losses for all those defrauded.”
