Pump and Dump: How Insiders Cash Out on Your FOMO

On 4 December 2024 Haliey Welch, who had gone viral that summer as the "Hawk Tuah girl", launched her own crypto coin, $HAWK. Within minutes thousands of fans were buying. The coin's total market value, its price multiplied by the number of coins, the same sum that gives a listed company its market capitalisation, shot to roughly $490 million. By the end of the day it was worth about $60 million. Blockchain analysts found that a small cluster of wallets had bought most of the supply in the first seconds and sold into the rush; one wallet alone took 17.5% of the coins and walked away with about $1.3 million.

Welch said her team "hasn't sold one token" and blamed automated "sniper" bots. Whoever pocketed the money, the shape of the chart was the oldest one in markets: a pump and a dump.

The trick, in plain steps

A pump and dump has three moves. First, insiders buy something small and cheap before anyone else knows about it. Second, they hype it, so outsiders rush in and push the price up. Third, the insiders sell everything to those outsiders at the top. Their selling crashes the price, and the late buyers are left "holding the bag": stuck with something worth a fraction of what they paid. In trading slang the late buyers are the insiders' "exit liquidity", the crowd whose buy orders let them get out.

Share traders know this from penny stocks. In the 1990s Jordan Belfort's firm, Stratton Oakmont, the story behind The Wolf of Wall Street, cold-called investors to push tiny shares the firm's insiders had already bought, then sold into the demand. In the stock market that is a crime under the 1934 Securities Exchange Act, and Belfort went to prison for securities fraud and money laundering.

Crypto makes every step cheaper. A "token" is a coin anyone can create on an existing blockchain, a public shared ledger, in a few minutes and for a few dollars, with no prospectus and no regulator signing off. It can be listed straight away on a decentralised exchange (DEX), an automated trading venue that runs on code and lets anyone list anything, unlike a stock exchange with listing rules. A "low-cap" token, crypto's penny stock, has a tiny market value, so a few thousand dollars of buying can double its price. And the hype travels on Telegram, X and TikTok faster than any boiler room could dial.

Who does the pumping

The crudest version is the Telegram "pump group". Members are told a time; at that minute the organisers announce a coin, everyone buys, and the price leaps. Many groups sell tiered memberships: pay more, get the coin's name a few seconds earlier. The organisers buy before the announcement and the top tiers just after, so the free members who buy last supply the money the others cash out with. The group itself is the scam.

The second version uses paid promoters. In October 2022 Kim Kardashian paid the Securities and Exchange Commission (SEC) $1.26 million to settle charges that she promoted a token called EthereumMax on Instagram without disclosing she had been paid $250,000 to do it. She did not admit or deny the findings.

The third is the team behind the coin, the founders themselves. Saitama, a token on the Ethereum blockchain, reportedly reached a market value of $7.5 billion at its peak. US prosecutors allege its executives coordinated buying across many wallets, paid professional trading firms to fake activity, publicly denied selling, and privately sold tokens worth millions; they say former chief executive Manpreet Kohli made about $20 million. Kohli has not been convicted and is fighting extradition from Britain.

How common it is

Common enough that the numbers are hard to believe. Chainalysis, a blockchain analytics firm whose software traces payments across public ledgers, looked at more than 160,000 Ethereum-based tokens that began trading on decentralised exchanges in 2023. It found that 54% showed patterns suggestive of a pump and dump: real outside buyers came in, then a single address pulled out more than 70% of the money sitting in the trading pool, leaving almost nothing behind. Those tokens made up only about 1.3% of trading volume, and the people behind them made about $241.6 million in total, roughly $2,500 each. One wallet ran 81 separate schemes and cleared about $830,000. The typical pump is small, fast and repeated.

Because blockchains are public, the evidence is usually visible: wallets buying before the "announcement", then selling at the peak. Seeing it is not the same as stopping it.

The law, slowly

For years almost nobody was charged. That changed in October 2024 with Operation Token Mirrors, in which the FBI created its own token, NexFundAI, and hired market-making firms (traders paid to keep a coin's market active) to see whether they would fake its trading. Prosecutors say three did. Prosecutors in Boston charged more than a dozen people and several firms, including Saitama's executives. Gotbit, one of the firms, admitted manipulating prices and trading volumes for clients including Saitama and forfeited about $23 million; its founder, Aleksei Andriunin, was sentenced in June 2025 to eight months, which he had already served while awaiting extradition. In August 2026 a Boston judge refused Kohli's bid to throw out his indictment, and a London judge sent his extradition to UK ministers to decide.

Celebrity coins have fared better. In February 2025 SEC staff said most meme coins, joke tokens with no business behind them, are not securities, which puts them outside the main US anti-fraud rules for investments. In March 2025 Welch's lawyer said the SEC had closed its $HAWK inquiry without action against her. Buyers filed a class action in federal court in New York against the launch platform overHere, its founder Clinton So, the Tuah the Moon Foundation and promoter Alex Larson Schultz; Welch was not named as a defendant.

The safest rule needs no knowledge of crypto at all. If a stranger, a celebrity or a chat group is urging people to buy something small, right now, they almost certainly bought it first, and they need buyers to sell to.