What Is A Pump And Dump Scheme

Searching for definitive answers about pump and dump schemes? Welcome!

BONKbot is here to break through all the noise and focus on giving you precise information about how these crypto scams typically unfold.

From their inner-workings and mechanics to some famous examples, plus tips on how to spot (and hopefully avoid) them - we’ve got you covered. 

Stay informed and protect your investments!  

What Is A Pump & Dump Scheme?

Put simply, a pump and dump scheme is a type of financial fraud where manipulators artificially inflate the price of an asset, often a stock or cryptocurrency, before selling it off at a profit. This leaves other investors with worthless holdings.

From start to finish, it’s a hype-driven scam. The perpetrators “pump” up excitement and value through false or exaggerated claims, then “dump” their coins or tokens once the price has seemingly peaked.

This abrupt sell-off crashes the market as the scammers pocket the gains.

In the crypto space, these schemes have become especially common, due to the market’s volatility, lack of regulation, and the ease of spreading buzz online.

Unlike traditional stocks, where oversight might catch such plays, cryptocurrencies often operate in a “Wild West” type of environment, making them prime targets for fraudsters.

This is not a new thing - pumps and dumps have sadly been around for years. 

How Do Pump & Dump Schemes Work In Crypto?

Crypto pump and dump schemes follow a predictable playbook, unfolding in distinct stages. Here’s how they typically work:  

Planning and Accumulation

Scammers pick a low-value, obscure cryptocurrency, often one with low trading volume, making it easier to manipulate.

They quietly buy up large amounts of this coin at a cheap price, building their stash without drawing attention.  

The Hype Machine (The Pump)

Next, they ignite excitement. There’s different ways to go about this. Often they’ll start posting glowing reviews on social media, spreading “insider tips” in Telegram or Discord groups, or paying influencers to tout the coin as “the next big thing.”

Fake news, doctored charts, or promises of massive returns fuel the fire. 

The goal is to trick regular investors into jumping in as the price starts climbing. Once that starts happening, the next stage can begin.

Price Surge

As more people buy in, driven by fear of missing out (FOMO), the coin’s value skyrockets. Trading volume spikes, and the chart fills up with lovely green candles surging upwards. New investors see the positive trend and pile in, pushing the price even higher. 

The Dump

Once the price hits a peak, the scammers will coordinate and orchestrate a rapid sell off of their holdings. They cash out at the inflated value, raking in profits. This flood of selling causes the price to plummet, often within hours or minutes. 

The Crash

Latecomers are left holding a coin that’s now worth pennies… or nothing at all. The hype vanishes, the scammers disappear, and the market resets, leaving victims confused and broke.

This cycle can happen over weeks, days, or even hours in the fast-moving crypto world. The anonymity of blockchain and the global reach of online platforms make it a scammer’s paradise.

Most Famous Pump & Dump Schemes In Crypto

The crypto market has seen its share of notorious pump and dump schemes. Here are three standout examples:  

Bitconnect (2016-2018)

Bitconnect promised insane returns through a “lending program” tied to its coin, $BCC. Promoters hyped it relentlessly, driving the price from under $1 to over $400. When the scheme collapsed in 2018 amid regulatory pressure, investors lost billions, and the coin became worthless. It’s now a cautionary tale in crypto history.  

OneCoin (2014-2017)

Marketed as a Bitcoin rival, OneCoin raised over $4 billion from investors worldwide. Its price was artificially inflated through aggressive marketing and fake hype, but it wasn’t even a real cryptocurrency, just a Ponzi scheme with no blockchain. Founder Ruja Ignatova vanished in 2017, and the scam unraveled, leaving victims empty-handed.

$LIBRA (2025)

In February 2025, Argentine President Javier Milei sparked a controversy promoting $LIBRA, a Solana-based memecoin, on X, as a private initiative to boost Argentina’s economy. This led to its value surging from pennies to nearly $5, before crashing over 95% within hours, costing investors millions and prompting accusations of a "rug pull" scam. 

Milei deleted his post, denied direct involvement, and likened the losses to gambling risks, but faced over 100 legal complaints, an Anti-Corruption Office probe he requested, and potential U.S. Justice Department scrutiny. American crypto developer Hayden Davis, linked to the project, admitted holding $100 million amid unverified claims of influencing Milei through his sister. The scandal, with insiders allegedly extracting up to $100 million, has led to calls for Milei’s impeachment and a significant drop in his public trust.

These cases highlight how greed and hype can blind even savvy investors in the crypto pump and dump game.  

How To Spot And Avoid A Pump And Dump Scheme

Protecting yourself starts with knowing the red flags. Here’s how to spot a pump and dump scheme and steer clear of danger:  

Unrealistic Promises

If someone’s guaranteeing “10x gains” or “overnight riches,” run, and run fast. Legit projects don’t promise you the earth and the heavens, they focus on real value and long-term growth, regularly shipping quality products. 

Sudden Hype From Nowhere

Why would a coin with no history suddenly be trending on X or Telegram? Dig deeper. Check its fundamentals, the whitepaper, team, and any use cases (zero use cases = red flag). Hype without substance is a warning sign.  

Spammy Promotion

Paid shills, fake testimonials, and aggressive “buy now” pressure are all classic hallmarks of a scam. Real projects build organic buzz.

Low Volume, Big Spikes

Sometimes a coin with a tiny trading volume suddenly jumps 1,000%. It’s suspicious. That’s manipulation, not magic.

Check exchanges like CoinMarketCap for volume data and proceed with caution.

Locked Wallets or Exit Scams

If developers hold most of the supply or you can’t sell after buying, it’s probably a trap. Research token distribution before investing. If you don’t know how, join Telegram trading and analysis communities to ask for help. 

What To Do If You’re Caught In a Pump and Dump?

Act fast:  

• Sell immediately if you can, cut your losses before the dump hits

  
  

• Report it to the exchange or platform hosting the coin

  
  

• Warn others in your network to stop the spread

  
  

• Avoid revenge trading… chasing losses only digs a deeper hole#

  
  

Prevention beats regret.

Stick to well-researched projects, diversify your portfolio, and never invest more than you can lose. 

Final Words

Pump and dump schemes prey on excitement and inexperience, especially in crypto’s unregulated corners.

They inflate prices with lies, then crash them for profit, leaving everyday investors burned. 

By understanding how they work, recognizing the signs, and acting swiftly, you can dodge these traps. Knowledge is your shield. Use it.  

Ready to trade smarter?

Check out BONKBot for a smooth and accessible meme coin trading experience.

For more on avoiding scams, read our guide on top crytpo trading scams to steer clear of.