If you’re a frequent Redditor or even a casual investor in the crypto community, you’ve probably heard rumors of “whales” and “pump and dump” schemes manipulating the markets. Oftentimes these theories are written off as paranoid explanations for random fluctuations in the market. In fact, these schemes are very real and more widespread than you’d think. There are dozens of groups all over Discord and Telegram with thousands of members organizing pump and dump schemes daily, in which they buy up cheap penny cryptos in a matter of minutes to artificially inflate the price several times over, spread FOMO throughout the community with fake news, wait for unsuspecting new investors to buy in, and dump all at once, screwing over everyone else in the name of cheap gains for everyone participating in the scam. If it seems too good to be true, it probably is. To research this article, I joined about a dozen Discord groups to follow their buy and sell signals. I did not participate in any myself, but I did watch the markets as they coordinated the attacks. Here are five reasons that you should NOT participate in cryptocurrency pump and dump groups:

1. You’re just as likely to fall victim to the scam as you are to profit from it.

Let’s start with the most selfish reason that you should not participate: It should come as no surprise that you’re likely to fall victim to a scam if you get involved with scammers. In theory, pump and dump groups rely on the participation of everyone in the group to buy and sell at a coordinated time. But what happens if a rogue member of the community decides that they want to take a little off the top and sells early? What’s stopping them? Remember: there is no honor among thieves. While researching this article, I joined about a dozen groups to watch how they operate, and the admins did not vet new members at all—in fact, they encourage as many participants as possible. That’s because…

2. They’re pyramid schemes.

Based on posts by Redditors spamming poorly moderated crypto subreddits, you’d think that these groups are the get rich quick answer to all of your student debt and mortgage woes. That’s because most groups only allow participants access to buy and sell signals if they refer others into the scheme, or, if they do allow you to participate, they only allow you to participate after higher ranking members. That gives members ample motivation to talk up their groups and spam invite codes whether or not they have actually made the gains they claim to have seen. The admins of the groups who organize dumps get signals before all other members, followed by top referrers. That means that you will likely only know to buy once the price has already been significantly inflated. The early participants in the scam profit off of the people who are recruited later. Coming into these groups, you’ll think you’re the scammer, until you realize that you’re just the bottom of the pyramid with no hope other than to try to desperately climb up to the top.

3. They’re potentially illegal.

Ever heard of insider trading? Throughout much of the world (the United States, the EU, Canada, China, India, and others), it is highly illegal to coordinate buys and sells in the market to manipulate price for short term gains. If you’re still under the impression that cryptocurrency is entirely unregulated (or that it will remain unregulated for long), I have bad news for you: it’s not. Yes, cryptocurrency is taxable in the US, but a tax audit isn’t the worst thing that can happen to you. Every day, more and more crypto investors, ICOs, and funds are being shut down by the SEC, and it should come to nobody’s surprise that jail time may be on the horizon. I can guarantee that there is someone in the US government trying to build a case against the perpetrators of the Bitconnect scam. Remember: the organizers of pump and dump groups do not vet new members at all; in fact, they incentivize participants to bring in completely anonymous new members through pyramid scheme-like referral programs. What’s stopping a member of the SEC from joining one?

4. It’s shortsighted and could be a factor in the collapse in the cryptocurrency market.

Pump and dump schemes cause complete destabilization in the market by artificially inflating prices in highly unpredictable ways. They bring in inexperienced traders who do not yet know the telltale signs of a pump and dump and will eventually pull their money out of the market after having been scammed one too many times. Once the dump happens, prices often fall below the original buy price, sabotaging any trust in that coin, whether or not that project may actually have real value and a real contribution to the community in the future. Pump and dump schemes rapidly create miniature versions of the dreaded crypto-bubble and burst. If we do not discourage this behavior sooner rather than later as a community, we may all fall victim to it at once.

5. It’s ethically wrong… if you believe in cryptocurrency’s original mission.

Depending on your moral compass, this may be the most or least important reason to abstain from pump and dump schemes, and I hope that for most of us it’s at the top, but here’s a friendly reminder: Bitcoin came into the world in the wake of the 2008 market crash as a way of throwing off the chains of the central banks and Wall Street scammers who brought many of us to financial ruin through greedy trading practices. In this author’s humble opinion, cryptocurrency will only survive if we all keep focus on its central mission. The crypto scammers who are manipulating markets are guilty of that same greedy behavior that crashed the world economy at the expense of the 99% who trusted the banks with their homes, their retirement funds, and their student loans. By being a crypto scammer, you’re guilty of the same, and you’re stealing from others. Don’t be that person who justifies morally dubious behavior by ridiculing new investors as “dumb money.” Or, if “morally dubious” isn’t a motivating factor for you, then see reasons #1-3.

Thanks for reading!

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