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

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.”

Pump and dump schemes are cyclical, speaking in 2018 and again in 2021. Source: presentation to ASIC by Professor Talis Putnins

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.

The outcome of the Sept FXS pump was a 90% price increase in less than one minute. Source: presentation to ASIC by Professor Talis Putnins

“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”.

Related: ASIC targets pump and dump Telegram groups

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.”

Screenshot of an announcement in ASX Pump Organisation Telegram chat from ASIC. Source: presentation to ASIC by Professor Talis Putnins

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.”


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London assembly member calls for ban on crypto ads in trains and buses

Sian Berry, former co-leader of the Green Party of England and Wales and current member of the London Assembly, is looking to crack down on crypto advertisements on public transport.

According to a Nov. 14 Twitter post, Berry said she would be recommending the Mayor of London, Sadiq Khan, ban all crypto advertising in the city’s transport network, including many rail and bus services. The assembly member’s call to action comes following token project Floki Inu announcing it would conduct an “full-out assault on the London public transportation system” with posters on Underground trains and buses.

“Where the advert says ‘this is completely unregulated, you may lose all your money’, they ought to have had second thoughts,” said Berry in an interview with the Guardian. “I don’t think cryptocurrency ads should be on the network. They’re unethical.”

The U.K. capital is no stranger to crypto advertising, being home to a number of exchanges and projects. Tokens including Richard Heart’s HEX have previously targeted the city for ads in newspapers, on public transportation, and even during sporting events. Last year, Binance blanketed the city in ads in advance of the launch of its U.K. arm.

Though many of these campaigns have gone forward without incident, Berry’s concerns seem to be focused on possible “pump and dump” schemes, in which advertising for a project could potentially cause a large number of Londoners to buy tokens and only a few investors profit by selling their holdings when the price rises. The United Kingdom’s Advertising Standards Authority blocked a campaign by crypto exchange Luno in May by claiming the firm’s “it’s time to buy” statement on ads could give the impression that investing in Bitcoin (BTC) was “straightforward and accessible.”

“I want to clean up ads on the tube in various ways, including removing ads for cars and airlines,” said Berry. “Risky financial products, like gambling, are part of that policy. I don’t want to ban cryptocurrencies outright and have no power to do so.”

Related: UK advertising watchdog classifies crypto ads as ‘red alert’

Berry added that she wasn’t specifically targeting Floki in the push for this crackdown, but rather as one of three crypto advertising campaigns in London. However, she noted that members of the Floki Army — i.e. supporters of the token on social media networks — had inundated her with messages “making it appear more like a cult than a scam.”

In Floki’s case, the ads seem to be contributing to a rise in the token price. According to data from CoinMarketCap, the price of the token surged more than 500% between Oct. 26 and Nov. 4, when it hit an all-time high of $0.0003406.

Cointelegraph reached out to Sian Berry, but did not receive a response at the time of publication.