Communications of the ACM
Researchers Track Crypto Pump-and-Dump Operations on Social Media
USC's Fred Morstatter said, “Pump and dump schemes are frauds, they are meant to defraud average people of their assets. In the context of more traditional securities like stocks, it’s highly illegal," although he acknowledged in the cryptocur
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Researchers at the University of Southern California's Information Sciences Institute (ISI) investigated cryptocurrency scammers' pump-and-dump practices, through which they buy cryptocurrency coins low, collaboratively inflate the price, then sell high.
The coins are not regulated, "so a lot of people try to manipulate the price by using social media to create false hype about them," explained ISI's Mehrnoosh Mirtaheri.
Pump-and-dump operations are conducted on small-volume coins so a small number of traders can manipulate their price, while Mirtaheri said the scammers also "recruit gullible participants on Twitter to help them pump the coins, and use bots to amplify the phenomenon."
The researchers developed an algorithm that analyzes conversations and tweets to flag when a pump-and-dump operation is about to occur, and Mirtaheri believes this research could translate into a warning system for small investors.
From USC Viterbi School of Engineering
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