Recently, memecoins have gained significant popularity in the crypto space. The prices of tokens from some trending projects can skyrocket instantly following a piece of news, but they often plummet just as quickly due to a lack of technical fundamentals. Additionally, scammers frequently exploit this trend by orchestrating pump-and-dump schemes to defraud users.
Frank, a new cryptocurrency investor, recently came across a memecoin called NOFEAR. Seeing a lot of buzz around the token in Telegram and Twitter, he believed it had the potential to be the next memecoin to skyrocket in price. Encouraged by the hype, he bought NOFEAR, hoping to try his luck.
NOFEAR's website and social media have made bold claims about having a top-tier technical team and partnerships with major blockchain projects. Social media and Telegram are filled with hype, with crypto influencers sharing "screenshots" of their high returns from investing in NOFEAR.
At the same time, several smart money addresses rapidly bought a large amount of NOFEAR, driving the price up and attracting investors like Frank. Once the price peaked, these addresses quietly sold off their holdings, leading to an oversupply and a sudden price collapse.
After buying at a high price, Frank saw the price of NOFEAR plummet. He tried to sell his tokens, but couldn't due to depleted market liquidity. Frank realized he'd been scammed. The scammers had already disappeared, deleting all social media accounts and the official website.
Here’s how a typical memecoin pump-and-dump scam works:
1. Creating and Promoting Fake Tokens
- False Advertising: Scammers create fake memecoin contracts and promote them through social media, forums, and crypto communities, using tactics like fabricated insider information, false celebrity endorsements, and fake partnerships.
- Creating Hype: They generate buzz using fake Twitter accounts, hire online trolls and bots to flood platforms with positive reviews, and even forge supportive comments from "well-known" cryptocurrency experts to attract investors.
2. Raising the Token Price
- Bulk Purchases: Scammers buy large quantities of the token, quickly driving up its market price.
- Manipulating Market Sentiment: They post optimistic news and predictions through influencer accounts, making investors believe the token will keep rising, prompting more purchases.
3. Selling for Cash
- Sell High: Once the price peaks, the scammers sell off large volumes of tokens, quickly cashing out.
- Price Crash: The mass sell-off causes the token price to plummet, triggering panic selling among investors and worsening the price collapse.
4. Exiting the Market
- Disappear: After cashing out, scammers shut down advertising channels, delete social media accounts, and remove websites to erase any clues to their identity.
- Investor Losses: Most ordinary investors suffer significant losses due to the market's liquidity collapse.
PSA：
- Before investing in any memecoins, always do thorough research and verify the authenticity of the project and the background of the team.
- Be cautious of tokens with drastic short-term price fluctuations, and avoid buying during price spikes.
- Trade through reputable exchanges, which usually have stricter vetting procedures.
imToken Is Always Protecting Your Token Security
In June, imToken marked a total of 4239 risky tokens, banned 1520 risky DApp websites and marked 1821 risky addresses.
In addition, if you find any suspiciously risky tokens or DApps, please contact us: support@token.im to help more users avoid token losses.
Closing Thoughts
With scams continually evolving, it is indeed challenging for average users to fully prevent them. imToken is committed to rapidly detecting issues and finding solutions, providing timely messages to the community, and educating users about various types of scams to protect them from losses.
We encourage you to read and share imToken Wallet Security Monthly Report and join hands with imToken to safeguard your token security.