A lot of individuals are eager to participate in the cryptocurrency market, making it one of the trendiest areas in the financial industry. Influencers in the cryptocurrency industry frequently use social media sites like Twitter, Instagram, and YouTube to communicate their thoughts and observations. The quantity of bogus cryptocurrency influencers attempting to con unwary investors has increased along with the popularity of cryptocurrencies.
What do shady cryptocurrency influencers do?
Typically the goal is to pump the price of the crypto asset and then once it reaches a certain price, they sell it and tank the price. Influencers could transmit false information to their followers or promote fraudulent projects or unrealistic investment prospects. Some could even intentionally inflate their follower count using bots or phony accounts, giving the impression that they are more prominent and trustworthy than they actually are. Keep in mind that this can appear anywhere, including sites like Twitch.com which is a streaming platform for gaming. There were individual streamers who were also pumping shady crypto assets on that site as well.
Common Signs of Shady Crypto Influencers.
Investment possibilities that seem too good to be true are probably too good to be true:
Shady crypto influencers frequently make promises of returns that seem too good to be true, such as promising 10x or 100x returns in a short amount of time. If an influencer makes such guarantees, it's probable that they're trying to defraud their fans.
Sports figures can also participate. For example, ex NBA player and ex ESPN personality, Paul Pierce, was recently busted by the SEC for making false public statements on twitter in order to pump a crypto named EthereumMax. If you want to read more about that story, here is a link.
Above is a graph that Paul Pierce tweeted out. The graph shows an increase of $1,145,469 million dollars in a single day of holding EMAX. The U.S. Securities and Exchange commission stated, "Pierce was at least negligent in not knowing that this Tweet was materially misleading because it omitted the fact that the screenshot did not reflect his own holdings of EMAX, but instead was a screenshot of another person’s holdings provided to him for promotional purposes."
That tweet makes it look like it is his own personal account but it wasn't. This got him in trouble with the SEC and cemented him as a shady crypto influencer.
Lack of transparency: Shady crypto influencers frequently withhold information about their relations with the cryptocurrency. In Pierce's case with the SEC, he never disclosed to the public that he was being paid to promote the crypto. The SEC alleges, "In total, Pierce received approximately 1,622,319,996,192 EMAX tokens, worth approximately $244,116 at the time he received them, from EthereumMax and/or its agents between May 24, 2021 and June 18, 2021 in exchange for his promotional tweets."
Fear of Missing Out:
To persuade their followers to invest in a specific project or cryptocurrency, shady crypto influencers may employ high-pressure techniques. They can advise their followers to invest right away before the chance disappears or that failing to do so will result in missing out on substantial gains.
Above is another tweet by Pierce in relation to the EMAX token. Those rocket emojis are frequently used in the crypto asset industry to indicate anticipations that a token will appreciate sharply. "To the moon" is a catchphrase often used in the context of investment, particularly in cryptocurrency or stocks, to express a strong belief that a particular asset's value will rise rapidly and exponentially in the future. It implies the hope or expectation that the investment will yield substantial profits and that the investor will become wealthy.
This is intended to create a feeling of fear of missing out(FOMO). The mental condition of anxiety and uncertainty known as FOMO is brought on by the conviction that other people are taking advantage of interesting, rewarding, or worthwhile events or chances while one is not. FOMO might be brought about by a number of circumstances, including social gatherings, professional development, monetary investments, or fads. It frequently causes impulsive conduct, such as making snap judgments or taking unwarranted risks, in an effort to prevent feeling excluded or regretful.
Rug Pull:
According to the SEC, "On June 5, 2021, Pierce Tweeted: “Gonna double down know [sic] @ethereum_max[,]” indicating that he was going to increase his investment in the crypto asset security. In fact, Pierce continued selling his tokens over the next week, including at least one sale on the date of the post. Pierce was at least negligent in not knowing that this post was false and misleading."
A "pump" is a rapid, significant spike in the price or trading volume of a certain cryptocurrency, frequently caused by a group of people working together to artificially inflate the price. This method is referred to as a "pump and dump" plan because the group buys a lot of the cryptocurrency and extensively advertises it on social media and other online platforms in order to lure additional investors and drive up the price. The group or individual sells its shares after the price has reached to a specific point, which causes the price to drop and leaves other investors with losses. Remember that pump and dump schemes are prohibited and can have serious consequences.
In Pierce's case, it appears he was trying to pump the price of EMAX on the same day he was selling the crypto. Shady stuff indeed.
Pierce agreed to pay a $1,115,000 penalty and approximately $240,000 in disgorgement and prejudgment interest. Pierce also agreed to not promote any crypto asset securities for three years.
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