Jack Kubinec

Last year was a lean one for crypto, but that didn’t put an end to rug pulls.



A report from Chainalysis today found that of all Ethereum ERC-20 tokens listed on DEXs in 2023, more than half met criteria for possible pump and dump schemes.&nbsp;



In a pump and dump, some illicit actor convinces investors to buy a token before selling a major share of the supply, collapsing the value and leaving those not in on the scheme holding the bag. In these schemes, scammers will sometimes wash trade, or buy and sell the same token, to create misleadingly high trading activity without any real change in ownership. This tactic artificially boosts the asset&#8217;s trading volume, giving the false impression that it is more in demand and potentially more valuable than it actually is.



Last year’s 90,408 possible ERC-20 pump and dumps identified by Chainalysis netted $241.6 million in profit for those draining the liquidity, amounting to a pretty paltry take rate for rug pullers — $2,672 per token dump.&nbsp;



Read more: <a href="https://blockworks.co/news/for-first-time-cftc-cracks-down-on-cryptos-pump-and-dump-schemes">For first time, CFTC cracks down on crypto’s ‘pump-and-dump’ schemes</a>



To identify pump and dumps, Chainalysis found tokens that were traded at least five times by <a href="https://blockworks.co/tag/dexs">DEX</a> users before a single address removed at least 70% of its <a href="https://blockworks.co/tag/liquidity">liquidity</a>, leaving the token with less than $300 in its liquidity pool. Put more simply, tokens investors traded before a whale sold their entire share, leaving holders with tokens they couldn’t sell.&nbsp;



Of note, <a href="https://blockworks.co/tag/chainalysis">Chainalysis</a> analyzed cases that met these criteria but couldn’t prove that every instance was in fact a market manipulation scheme.



While the average pump and dump scenario earned the perpetrator little more than a couple months’ rent, some market manipulators were especially prolific. Chainalysis identified one wallet that orchestrated 81 possible pump and dumps grossing $830,000 in profit.



Pump and dump schemes tend to harm retail investors, and they’re a sticky <a href="https://blockworks.co/news/crypto-twitter-bots-returns">part of crypto’s reputation</a> that have led some regulators to <a href="https://blockworks.co/news/republican-crypto-market-bill-handout">sour on the asset class</a>. 



In August, the Securities and Exchange Commission <a href="https://www.sec.gov/news/press-release/2023-157">convicted</a> former New Jersey correctional officer John DeSalvo with fraud over a pump and dump scheme. DeSalvo <a href="https://www.justice.gov/usao-nj/pr/former-new-jersey-corrections-officer-charged-cryptocurrency-fraud-scheme-targeted-law">marketed</a> his Blazar token to law enforcement officers as a “crypto pension” and drew more than $600,000 in investment before selling billions of his own tokens and collapsing the enterprise, the US Attorney’s office for New Jersey said.



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chainalysis

Average potential crypto rug pull makes $2,600 in profit: Chainalysis

Sebastian Sinclair

Republican representative Madison Cawthorn of North Carolina has been directed to pay more than $14,000 for his involvement in a crypto pump-and-dump scheme earlier this year.



The House Ethics Committee approved a <a href="https://ethics.house.gov/sites/ethics.house.gov/files/documents/Committee%20Report_50.pdf" target="_blank" rel="noreferrer noopener">Dec. 1 report</a> by its investigative subcommittee (ISC) on Tuesday, which found Cawthorn had violated House rules by having a financial interest in a supposed crypto token known as LGB Coin without first disclosing it.



According to the report, Cawthorn bought 180 billion LGB coins for $150,000 on Dec. 21, 2021 before offloading them on three occasions over an 18-day period. Cawthorn was seen promoting the token online and in person multiple times, including after its price had tanked 80% in April.



Cawthorn will now pay $14,237 to an “appropriate charitable organization” by Dec. 31, 2022 and must pay $1,000 in late filing fees to the US Department of the Treasury by Dec. 20.



“Representative Cawthorn did not disclose either his purchase or sales of his LGB coin until after the Committee established the ISC,” members of the subcommittee said in their report.



The ISC failed to reach a consensus on whether Cawthorn intended to personally profit from his promotional activities. The total sum of the fine likely stems from the ISC being unable to find whether Cawthorn knowingly or willfully engaged in the scheme.



LGB coin touted itself as an ERC-20 meme token “inspiring positivity and patriotism.” The token represented the Let’s Go Brandon movement which was a stand-in, among <a href="https://apnews.com/article/lets-go-brandon-what-does-it-mean-republicans-joe-biden-ab13db212067928455a3dba07756a160" target="_blank" rel="noreferrer noopener">right-wing circles</a>, and a reference to US President Joe Biden. Its true meaning was “F— Joe Biden.”



A <a href="https://www.classaction.org/media/ford-v-koutoulas-et-al.pdf" target="_blank" rel="noreferrer noopener">class action lawsuit</a> naming several promoters of the LGB token project, including hedge fund manager James Koutoulas, is currently working its way through the courts.



Cawthorn had also been investigated over his alleged “improper relationship” with a congressional staffer, though the ISC said in its report it had found no evidence to support that claim.



The 26-year-old, who became one of Congress’ youngest members, <a href="https://www.nytimes.com/2022/05/17/us/politics/madison-cawthorn-concedes-nc-primary-gop.html" target="_blank" rel="noreferrer noopener">lost the party primary contest</a> in May in the Republican-held rural 11th district of North Carolina by a tight margin of around 1,500 votes.



Considered a political <a href="https://www.nytimes.com/2022/05/17/us/politics/madison-cawthorn-concedes-nc-primary-gop.html" target="_blank" rel="noreferrer noopener">firebrand</a> by many critics and proponents, Cawthorn was once tipped as a rising figure within the far-right faction of the Republican party, riding on the back of Trumpism when he was elected in 2020.



The young politician <a href="https://www.nbcnews.com/politics/congress/cawthorn-responds-gop-backlash-orgy-comments-blaming-democrats-remarks-rcna22667" target="_blank" rel="noreferrer noopener">fell out of favor</a> with his colleagues when he insinuated that some Republican members of Congress had invited him to a cocaine-fueled orgy.



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