Traders Are Talking Up Cryptocurrencies, Then Dumping Them, Costing Others Millions (wsj.com) 123
Dozens of trading groups are manipulating the price of cryptocurrencies on some of the largest online exchanges, generating at least $825 million in trading activity over the past six months -- and hundreds of millions in losses for those caught on the wrong side, according to a Wall Street Journal analysis. From a report: In a review of trading data and online communications among traders between January and the end of July, the Journal identified 175 "pump and dump" schemes involving 121 different digital coins, which show a sudden rise in price and an equally sudden fall minutes later.
A pump-and-dump scheme is one of the oldest types of market fraud: Traders talk up the price of an asset before dumping it for a profit and leaving fooled investors with shrunken shares. The Securities and Exchange Commission regularly brings civil cases alleging pump and dumps using publicly traded stocks. Manipulations of cryptocurrencies are no different, but regulators have yet to bring a case in the more opaque market for them. The SEC declined to comment.
A pump-and-dump scheme is one of the oldest types of market fraud: Traders talk up the price of an asset before dumping it for a profit and leaving fooled investors with shrunken shares. The Securities and Exchange Commission regularly brings civil cases alleging pump and dumps using publicly traded stocks. Manipulations of cryptocurrencies are no different, but regulators have yet to bring a case in the more opaque market for them. The SEC declined to comment.
Costing others millions (Score:4, Insightful)
Yep, you got it.
That's how the market works in a capitalist system, comrade.
Re: Costing others millions (Score:2)
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This is exactly how the stock market has worked for ~200 years.
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Legalized fraud/theft/robbery is the core of the entire problem.
Except in this case, the "victims" volunteered to be robbed.
When the same work should be worth the same.
Compensation should be proportional to the value produced, not the effort expended.
Re:Profit is merely legalized crime. (Score:4, Insightful)
Yeah! If those old ladies didn't wanna be mugged, what were they doing in the park?
Re: Profit is merely legalized crime. (Score:4, Informative)
If people are buying into crypto currencies as a long term investment, this small dip should matter little in the long run. If these people were trying to make short term flips to make money, they are not so different from the people who scammed them. In your analogy they are just other muggers in the park who were themselves mugged.
Re: Profit is merely legalized crime. (Score:5, Insightful)
Would you consider fraud to be just another voluntary exchange? Because pump and dump is a form of fraud.
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Would you consider fraud to be just another voluntary exchange? Because pump and dump is a form of fraud.
No kidding. Apparently, to some on this board, being a "sophisticated investor" means being able to discern all fraud and dishonesty.
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Voluntary exchanges and park muggings are totally the same. The people who made these trades were not coerced and if they value crypto currencies improperly that is their own fault. Would you feel any remorse for them over this or any other investment that turned out a loss through natural shifts in the market?
They were not coerced, but they were lied to. Fraud is illegal for a reason, and is not something to be defended just because someone didn't know they were being lied to.
If people are buying into crypto currencies as a long term investment, this small dip should matter little in the long run. If these people were trying to make short term flips to make money, they are not so different from the people who scammed them. In your analogy they are just other muggers in the park who were themselves mugged.
Being short on a security does not imply fraud or a scam. So no, they were not the same as the people who scammed them, just because they had a short term investment.
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If the park requires you to sign a clearly explained document that any money you have on you (and that you're welcome to put your money safely in a bank before you enter if you don't want to bring any) is forfeit the minute you enter the park, your example is exactly like stocks. Well, assuming the muggers ask nicely and the person capitulates, because you don't often hear about people beating each other up over a stock certificate.
So, are we now openly acknowledging that Wall Street is full of criminals and frauds? I mean, I'm cool with that; it means I don't have to tiptoe around the issue anymore. But I'm not sure everyone knows that you should expect to be fleeced when you invest your money. Quite a market we have, eh?
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A market is like anything else in life, jump into the sea without knowing how to swim and you'll drown.
So, yes? Is part of knowing how to swim in this analogy knowing that there are a lot of dishonest people in the investment industry?
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Legalized fraud/theft/robbery is the core of the entire problem.
Except in this case, the "victims" volunteered to be robbed.
No one volunteers to be robbed. There is fraud involved here. Surely you don't advocate lying and deception as a normal part of doing business.
When the same work should be worth the same.
Compensation should be proportional to the value produced, not the effort expended.
I would question how much value is really produced by pump and dump schemes. If I tell you that I am long on a security when I'm actually short, and convince you to join me in a long term investment, and then sell as soon as you make your investment, causing the price to drop, what value is produced?
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Most of you don't know what shorting security means. Is not a short term investment.
Shorting a security means borrowing shares now and selling them at a high price, hoping the price will come down by the time you have to pay for the shares you borrowed, so you can net the difference. Does that sound right? While this does not have to be a short-term investment, it usually is, because there is a set time by which you have to cover the shares you borrowed.
Re: Costing others millions (Score:4, Funny)
Cryptocurrencies are not stocks. Their raison d'etre is that they are outside the system, and free of government control. Now some speculators bought into the hype, bet the wrong way, and are whining that the government didn't spend my tax dollars to protect them. Why should I care?
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The issue here is that enough of the money that people get via these trading schemes has moved from the stock market to the crypto market that it is hurting them.
Citation needed. This market is as shallow as people who read fiction and think that it makes them smart.
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For certain types of investors, those with a particular category of investment strategy. When they have enough cash.
When they don't have enough cash, they buy lottery tickets instead.
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You first becoming aware of something does not a craze make.
Penny stocks have been scams forever.
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Many of them were people that are "anti-establishment", other thought themselves as visionaries ahead of their time, while some others are chicken little that thought themselves thought quick-thinking and prudent while more likely just being duped into the equivalent of the"the sky is falling" or some tin-foil hat conspiracies. Look at how bitcoin prices spiked or plunged to every semi-plaus
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Ans according to the SEC, it's a crime. So I guess you're saying the market runs on crime?
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That was my reaction as well. In other news, Water is Wet! Politicians Lie! Prices Increase! The Sun Rises! The Sun Sets! The Sun Crashes!
All of this brought to you by Capt.Obvious, RSNC.
Shocking truth (Score:3, Insightful)
You lost the money the moment you gave it to someone for cryptocurrencies.
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(if it is hidden behind a thick black curtain, the curtain is not there by accident).
and never trust guys wearing balaclavas and carrying guns.
No kidding? (Score:2)
Not to be overly harsh, but...
Who could have possibly anticipated that a virtual "monetary system", which has absolutely no controls or laws governing it, by design, could be manipulated in the simplest way possible, just so someone could make a few million dollars?
I guess the same incredibly naive people who come up with it in the first place, and also, thought that there was absolutely nothing wrong or fishy when valuation increases by thousands of percent *with no act
Re: Miner Miner Forty-Niner (Score:1)
The 1849 boom happened for a different reason. President Polk has just siezed California from Mexico. They needed to rapidly rush a lot of white Americans onto the land to occupy it for the U.S.
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Also the same people who talk about "investing" in various altcoins as well as BTC. At what point does it occur to them that cryptocurrency is the digital equivalent of the guy down the street
Re:No kidding? (Score:4, Insightful)
> At what point does one realize that he's holding the digital equivalent of Monopoly money?
Probably not until there's nobody left who is willing to buy it off them for real money.
=Smidge=
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Nonsense comments like this is why no one takes cryptocurrency fanboys seriously.
I could try to explain what money is and how it works but it would just be lost on you.
Under the US system, money is debt. It's that simple. We put up real property and our labor to borrow made-up money, which is owed back to the bank anyway.
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I thought he was speaking Yiddish.
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Not to be overly harsh, but...
Who could have possibly anticipated that a virtual "monetary system", which has absolutely no controls or laws governing it, by design, could be manipulated in the simplest way possible, just so someone could make a few million dollars?
Greed. Pure and simple. The greed of the manipulators, married to the greed of their marks.
The same greed that drives con men and Ponzi schemes. The concept that the mark can make the big bucks.
If cryptocurrency was so great, then they wouldn't take dollars - or any other currency for it at all, because any currency they would take for it would lose value while the Crypto was increasing in value at incredible rates. Why would the crypto traders want to get currency that is losing value at the same ra
NEWSFLASH: (Score:5, Insightful)
NEWSFLASH: "A fool and his money..."
I've got a few friends dabbling in it (Score:2)
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and when pressed they'll admit it's basically gambling that they can get out of the market and leave someone else holding the bag.
Oh, I'm certain they will. Or maybe not. There is a well known phenomenon there of investment greed based optimism. Problem is those who invest in CC are likely to be marks. Regular stock market dilettantes get hit a lot. Buy because it's going grazy, then refuse to sell at the first sign of a drop-off, then ride it the whole way to the bottom. Buy high and sell low is a real phenomenon.
It's not like some folks got together and decided on a scheme for people to give them their money then after they get th
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Marks being fools doesn't make fraud any more legal.
Yes, and? (Score:1)
It's very well known that thinly traded or illiquid assets are especially vulnerable to market manipulation. There's a reason why stock market pump-and-dumps mostly happen in "penny" stocks.
This is not an argument for or against cryptocurrencies. It's something that can happen in any market.
Welcome (Score:2)
Welcome to crypto currency trading. Enjoy your stay.
Comment removed (Score:5, Interesting)
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Hold on there, not more stupid than lottery, odds and the amount of money recoverable are still better than gambling.
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Bitcoins are a poor investment because you're gambling on something that doesn't really exist.
If Bitcoins don't exist, then how are people holding and trading them? I bought in at $450, it's been a fucking great investment!
And don't give me any of this "no intrinsic value" bullshit. There's a lot of intrinsic value in being able to keep and move money outside of the current banking system.
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They'll bounce back (Score:2)
Shutup, man. Stop trying to talk the market down. Given enough time, they'll bounce back. I'll ride this out and be rich. You'll see. You'll all see!
Comedy gold (Score:4, Insightful)
Step 2: Somehow miss the point that the asset is not productive and the any wealth gain one may receive is an equal wealth loss for someone else.
Step 3: Be surprised that sophisticated investors are wiping the floor with your HODL BEFORE I SODL nonsense.
pfff.. (Score:2)
and this is different... how? (Score:2)
isn't this what traders do? it's just that they now added cryptocurrencies to their playbook.
And Tomorrow... (Score:3)
And tomorrow the sun will rise at dawn.
This isn't anything new. This is what's been done on Wall St. for decades. Why would anyone be surprised that it's now being done on something else that's traded???
Pump & dump? (Score:2)
Y'know, I understand there are criminal laws against pump & dump. You read about them when people talk about penny stocks (and all the freakin' spam we get to pump).
Wonder when someone's going to hit the traders with those charges?
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what pump and dump? Maybe it's just a lousy, volatile and illiquid investment vehicle (to say the least)? Bitcoin plummetted today because the ETF exchange the bitctards were all chubbed up for didn't happen.
But no, it's those eeeeeveeel pump and dumpers who are the fault of it going from $20K to $6.2K, not the fact that it was overhyped?
So this is something new? (Score:1)
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What do you mean, the experts say Bitcoin is now poised to test $8,500....
waaaah???!!!! Bitcoin plummetting to $6.2K today! Oh noes, my kid's college! my retirement!
oh wait, I don't own any of that crap
Re:Free market (Score:5, Insightful)
Just who exactly do you think these "investors" are who are BILKING others? That's right. Bankers, or those in banker adjacent industries.
Regulation exists because an industry has proven themselves UNTRUSTWORTHY.
It's quite the opposite (Score:5, Interesting)
Also, most of the houses foreclosed during the crash were investment properties. Besides a few high profile cases touted in the media there wasn't a lot of folks borrowing outside their means for their main domicile. Again, a lack of regulation made this possible as there was no regulatory oversight when people were borrowing for these investment properties. Banks weren't required to check ability to pay much or at all, which further inflated the bubble.
Donald Trump & the Republican lead Congress (with a bit of help from the right wing Dems) have further deregulated the banks and given them license to go back to the kind of lending and over-extending that caused the 2008 crash. On the plus side for Trump & Co he'll likely be out of office by the time the effects take place, just like how the Bush/Clinton deregulation got handed off to Obama to fix.
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BS about the investment properties. I worked the foreclosures. I also worked on the massive documentation project going over those loans. Our system has codes as to whether a property was a borrower's primary residence, a second home, or an investment property. Oddly enough, the coding was 1, 2 and 3. Very direct. Although I saw 3s from time to time, the vast majority, across all states, was 1, primary residence. Florida and California had a higher portion, but not even 10% in those states.
So, unless
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What? The concept that if you want the bank to pay you interest on deposits the bank has to do something productive with the money such as lend a significant proportion of it out in order to collect at least that amount of interest upon it? There's your research.
Non-fractional reserve banking is called a safe deposit box. You can't write negotiable instruments against it or use an ATM card to access it, and you'll pay a substantial monthly fee, but anything that
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it is lend out 10 to 50 times.
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Ironically from someone who demands that others research things, you've provided no support in addition to being totally wrong.
You're taking the reciprocal of the required reserve [federalreserve.gov] and treating it as if that applies to all the money deposited in the bank.
If I have $100 and lend you $95 for 6 months, I've reserved 5% of the money and given you 19x the money I held in reserve. But I've still only lent out 95% of the money. I still have $5, and you still have $95. I'll very like
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Trump is getting re-elected in 2020.