The Anatomy of a Cryptocurrency Pump-and-Dump Scheme

While pump-and-dump (P&D) schemes have attracted the attention of cryptocurrency observers and regulators alike, this paper is the first detailed study of P&D activities in cryptocurrency markets. We present a case study of a recent P&D event, investigate 220 P&D activities organized in Telegram channels from July 21, 2018 to November 18, 2018, and discover patterns in crypto-markets associated with P&D schemes. We then build a model that predicts the pump likelihood of all coins listed in an crypto-exchange prior to a pump. The model exhibits high precision as well as robustness, and can be used to create a simple, yet very effective trading strategy, which we empirically demonstrate can generate a return as high as 80% on small retail investment within a span of three weeks.