Scientists use A.I. to make money from crypto scammers

Ever heard of the pump and dump? For those that aren’t familiar with thar term, a “pump and dump” refers to one of the oldest (and easiest) stock exchange scams in the book. Here’s how it works:

  1. Scammers invest in a worthless asset
  2. Scammers convince others to invest in the same worthless asset
  3. The value of the worthless asset skyrockets and other people buy in thinking the stock is actually valuable
  4. The original scammers sell their shares at an enormous profit before the value comes crashing down as other people sell off their shares.
  5. In the end, most of the people who were convinced by the scammers and the innocent bystanders lose money while the scammers profit
Photo by Pixabay

Today, this scheme is easier than ever to pull off thanks to cryptocurrency. Pump and dumps of traditional stocks are illegal, but crypto is a legal grey area that doesn’t have the same strict regulation yet. Crypto also makes trades fast and anonymous, both of which make scams easier to pull off. Some crypto pump and dump schemes are enormous, like the “Binance Pump Signals” group on Telegram that hosts over 400,000 members! These crypto pump and dump groups often orchestrate multiple “pumps” a day, each pump lasting no more than a few minutes and often less than one minute. The creators of the pump scheme will purchase a worthless crypto coin hours or days in advance and then reveal which coin will be pumped to everyone in the group at once. This way, the leaders of the scheme are sure to make a profit because they know which coin will be use before hand. Everyone else scrambles to invest low and then sell high before the pump is over, and many group members end up losing money.

Photo by Alesia Kozik

Pump and dumps are interested, but basically illegal and very volatile for everyone except inner circle that controls the scheme. However, two data scientists, Jiahua Xu and Benjamin Livshits, discovered a legal way to make constant and reliable returns off of crypto pump and dumps. How did they do it? With machine learning, of course! Modern problems require modern solutions.

Xu and Livshits trained an algorithm to identify when crypto coins were going to be “pumped” by analyzing purchases of different coins. The actual science is pretty complicated, but the general idea is very simple. The algorithm was taught to identify when the conspiring leaders of a pump and dump scheme were buying into a crypto coin in preparation for their next pump. Because there are hundreds of active pump and dump groups, the A.I. analyses thousands of crypto coins to identify which ones would be pumped next. This allows investors to buy into crypto coins when they are still cheap and then sell out once the value is inflated. Essentially, the algorithm lets anyone into the inner circle of crypto pump and dumps. It allows users to make money off of these scammers, instead of losing money to them.

Photo by Andrea Piacquadio

The best part about this “trading strategy” is that it offers consistent returns. Xu and Livshits claim that the algorithm could provide a 60% return on investment in under 3 months. That’s not quite the sky-high return that pump and dump scammers promise, but it is safer and reliable and, perhaps most importantly, legal.

Young investors excited about crypto and the “democratization of Wall Street” should consider learning more about intelligent algorithmic predictions. In this wild west of blockchain currencies and meme stocks, it might be worth our time to invest in some A.I.


2 replies on “Scientists use A.I. to make money from crypto scammers”

I mean judging from the article, the scammers are not really getting screwed over. The ML model just enables these data scientists to join the scammers in the initial buy-ins before the pump starts and then dump it before the price crashes. Been using the multi-DEX portfolio tracker from DEX tracking App at


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