Traders Are Talking Up Cryptocurrencies, Then Dumping Them, Costing Others Millions (wsj.com)

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.

Comments

Costing others millions

[nospam007]

Yep, you got it.
That's how the market works in a capitalist system, comrade.

Re: Costing others millions

[Anonymous Coward]

This is exactly how the stock market has worked for ~200 years.

Re:Costing others millions

[PseudoThink]

...or to reframe the headline: "Speculators are butthurt when the hype they believed isn't true."

Re: Costing others millions

[ShanghaiBill]

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?

Re:Costing others millions

[hai_Priesty]

Though unlike those duped into penny stock craze, not all of them are optimistic, gullible investors to Wall Street.

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-plausible or totally bizzare rumours, and how they overreact to every news including Trump being elected or yet another CEO calling bitcoin a fraud for the umpteenth time.

Bubbles happen all the time, but the amount of bitcoin-bull intellectual snobs you see online (some will make passionate(?) case on why the USA system will collapse, others make the case of boundless bitcoin potential while ignoring the elephant in the room) seems worse than many other bubbles, perhaps second only to the dot-com bubble if we only count this half-century.

Shocking truth

[Anonymous Coward]

You lost the money the moment you gave it to someone for cryptocurrencies.

NEWSFLASH:

[Type44Q]

NEWSFLASH: "A fool and his money..."

Re:NEWSFLASH:

[njvack]

Marks being fools doesn't make fraud any more legal.

Re:No kidding?

[Smidge204]

> 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=

Re:Free market

[Gojira Shipi-Taro]

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

[rsilvergun]

the housing crash was caused by deregulation. Clinton (Bill) repealed a bunch of laws meant to prevent Mainstreet and Wallstreet banks from intermingling. That's how you got Credit Derivative Swaps that let them hide their losses.

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.

Re:It's quite the opposite

[Anonymous Coward]

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 you've worked at a bank that truly had more investment properties being foreclosed than primary residences, please shut the heck up. Indeed, please provide a legitimate source for your statement that "most of the houses foreclosed during the crash were investment properties."

Re:Profit is merely legalized crime.

[sjames]

Yeah! If those old ladies didn't wanna be mugged, what were they doing in the park?

It's all play-money anyway.

[Hallux-F-Sinister]

Cry me a virtual river. One group of people stupidly buy that which doesn't even objectively exist, hoping to make money out of nothing, and then whine when they get ripped off.

These people were trying to create wealth out of nothing, evolving from action that really serves no one, helps no one, and accomplishes nothing. Bitcoin speculation is like you gambling on what number I'm thinking of, when you have to tell me what your guess was, before I tell you whether or not you were right, and unsurpisingly, you always lose. You can never prove what number I either was, or wasn't thinking of, and I have an interest (being the person you're betting against,) in picking a different number from the one you state.

If lotteries are taxes on people who are bad at math, then losses from speculating on Bitcoin (and any other so-called "cryptocurrency" or "virtual currency,") are taxes on idiocy. Despite being a relatively new thing, there are old quotes that apply perfectly to this situation, including such classics as "there's a fool born every minute," and "a fool and his money are soon parted..." and probably others but you get the idea.

Or maybe you don't get the idea, because you're the sort of person who is holding Bitcoins. I wish I could help but, besides pointing out the painfully obvious, I don't know how. Bitcoins are a poor investment because you're gambling on something that doesn't really exist.

The really sad part is the amount of environmental damage done by all the waste-heat from all the computers of all the morons trying to, for all intents and purposes, pray their way into wealth, and the amount of e-waste generated on computers that will never be put to any real, constructive purpose, and will likely ultimately end up in scrapheaps leaching toxic compounds into the world around them.

Re:No kidding?

[Ol Olsoc]

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 rate CC gains it??

Re: Profit is merely legalized crime.

[alvinrod]

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?

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.

Comedy gold

[inking]

Step 1: Buy a non-productive asset.

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.

Re: Profit is merely legalized crime.

[sjames]

Would you consider fraud to be just another voluntary exchange? Because pump and dump is a form of fraud.

And Tomorrow...

[dcw3]

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???

Re: Profit is merely legalized crime.

[kilfarsnar]

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.