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Crypto warning issued

Trustees Executors CEO urges investors to be wary of ‘pump-and dump’ crypto schemes promoted by celebrities as prices fall

Friday, August 19th 2022, 9:02AM

Investors are being urged to be wary of potentially misleading cryptocurrency offers as the popular digital asset class suffers a big drop in prices.

The first half of 2022 has been bad for the crypto market, with Bitcoin and Ethereum down more than 50% from their all-time highs in late 2021.

Trustees Executors chief executive Ryan Bessemer says the global popularity of crypto has seen the rise of “pump-and-dump” schemes that can mislead investors into buying artificially inflated tokens.

“It’s important that Kiwis thinking about investing in crypto educate themselves about the crypto ecosystem. This also means being suspicious of schemes that are being promoted by paying celebrities and social media influencers. 

“Pump-and-dump schemes work by luring investors to buy tokens at inflated prices under the pretext of creating the next batch of crypto millionaires. The people who own most of the tokens sell out, which causes an immediate fall in the token’s prices. This can drain assets overnight.”

Bessemer said the creators of the SafeMoon crypto token is the latest example of an alleged pump-and-dump scheme involving A-list celebrities, including Nick Carter, Soulja Boy and YouTubers Jake Paul and Ben Phillips.

“SafeMoon tokens were first sold in 2021 and increased in price by over 21,000% within one month. However, token holders lost hundreds of millions of dollars after it was revealed SafeMoon’s founders had falsely stated their transaction fees would be locked away in a liquidity pool for several years.

“The price of SafeMoon tokens dropped by more than 70% after a blog post revealed that the liquidity pools were not locked.

“Celebrities such as boxer Jake Paul and rapper Lil Yachty heavily promoted the SafeMoon tokens on social media after they were first sold. The latest class action claims the SafeMoon tokens have no real-world value, and unlike other crypto assets, half of all tokens are owned by SafeMoon itself.”

Bessemer says that most experts recommend allocating no more than 5% of an investment portfolio to cryptocurrencies and highlighted the importance of taking the time to understand the risks involved.

“It’s smarter to prioritise more important aspects of your finances — like saving up for an emergency, contributing to your retirement and paying off debt — before investing in crypto. You should only invest what you’re OK with losing,” he said. 

“SafeMoon is a reminder that cryptocurrencies are highly volatile and risky assets, even more so than stocks. Economic and political uncertainty can create even more volatility in the markets. While Bitcoin and Ethereum have bounced back after big falls in the first half of 2022, they’re still a long way from their all-time highs of last year.”

Tags: cryptocurrency

« [The Wrap] One good deal; One dud dealTough times ahead for NZ economy: Nikko economist »

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