Investors Ask South Korean Gov’t to Crackdown on Cryptocurrency Pump and Dumps
South Korean investors have asked the government to crackdown on cryptocurrency pump and dump schemes after a series of events led the market to record absurd gains and losses within short periods of time.
Pump and Dump
Mostly through Telegram, pump and dump groups in South Korea have continued to lure beginner investors and casual traders into so-called “pumps” by taking advantage of low market cap cryptocurrencies. Some of the messages sent by these pump and dump groups to investors read, “we’ve found a cryptocurrency with virtually no volume but with some interest. We’re looking for investors to pump the coin and dump in the short-term.”
As Korbit CEO Tony Lyu told Nathaniel Poppers of the New York Times, the South Korean finance sector and stock market move strongly by word of mouth. Investors often describe the local market as a copper pan because it heats up very quickly and cools down shortly thereafter. Both the traditional stock market and cryptocurrency exchange market in South Korea are strongly driven by FOMO, or fear of missing out.
As such, upon the discovery of tokens with sudden increase in value and volume, investors rush in with all of their funds to invest. Most of the time, investors end up losing the majority of their funds from their risky trades and by participating in pump and dump schemes.
The problem with the current trend in the local cryptocurrency market is that investors are not aware pump and dump schemes are illegal and are relying on scammers with their life savings. One message sent by a pump and dump group to an individual investor obtained by mainstream media outlet Chosun said, “we’ve found a coin with great potential. Get a loan and maximize your bank account. We’ll tell you the coin once you add us on Telegram.”
By luring in investors to their “potent investments” and letting individual investors participate in pump and dump schemes without knowing their illicit nature, scammers and pump and dump groups in South Korea have made significant sums of money over the past year.
Individual investors who do fall victim to these schemes are also at fault for failing to do their own research and due diligence, as participation in pump and dump schemes can be avoidable.
But, long-time traders have also started to ask the South Korean government for help and to regulate the cryptocurrency exchange market due to insider trading. Earlier in April, an Ethereum-based token called Mithril surged by more than 11,000 percent within a 24-hour period because of an insider tip regarding Bithumb’s potential listing of Mithril.
After the rumor turned out to be true and Bithumb listed Mithril, its price, volume, and market cap plunged. Many investors lost 98 percent of their funds invested in Mithril as a result of the pump and dump.
A similar pattern occurred with Storm, Kyber Network, OmiseGo, and Aelf. These tokens, which were listed by Bithumb, experienced a substantial increase in value prior to the official announcement from Bithumb, leading investors to believe insiders have continuously released tips on potential listings.
To prevent investors from losing significant sums of money from these pump and dump operations, South Korean investors have asked the government to better regulate the market with strict policies and practical regulations.