There was a new presentation released which revealed the way (ASIC) the Australian Securities and Investments Commission has figured out about the pump and dumps unethical activities and schemes in the crypto industry. And how the stock market has become the victim of it too.
On December 28, another presentation was published from an unknown source. Later, it was taken by Australian officials under the freedom of information request act.
Gamestop was presented as a relevant example of a pump and dump scheme in the US stock market. In the presentation, the finance professor at the University of Technology (Sydney), crypto experts, and researchers, Talis Putnins mentioned these pump and dump schemes running across the whole crypto market and it’s also happening in the stock market now. Scammers or shortcut success seekers are creating “meme coins and stocks” to run this pump and dump activity.
All these activities are considered totally illegal, calculated, and symmetric pumps in the stock market a part of market manipulation. On the other hand, the crypto industry is mostly unregulated. But, it doesn’t mean we can consider them legal. According to Talis Putnins crypto, pump, and dump activities may fall under the scope of CPR (Consumer protection rules).
Throughout the presentation, Putnins emphasizes all the possible harm pump and dump activities bring to the investor or trader. There were two major issues that Putnins highlighted in his presentation:
The biggest and most devastating problem was that people will start losing fate in the cryptocurrency market because of these pump and dump coins. Not only the crypto industry it may affect all the technologies that support cryptocurrency like; blockchain. It can become a domino effect and people will lose all their confidence in this industry one by one.
The other major issue is the average expected return from all the pumps and dump is mostly negative. This could easily be a violation of (CPR) consumer protection rules.
Putnins wrote in his presentation, “No rational person (absent an advantage) would participate.” If we deduct the trading account fees from the amount the average result is negative.
Even after Putnins presented the points about all the pump and dump schemes being illegal and harmful. The Australian stock market still got the hit from the pump and dump scheme and then, Australian regulators started taking serious actions.
In October the presentation explains, The regulator broadcasted a message that mentioned that “all coordinated pumping of shares for gaining profits could be illegal activity.” Moreover, the regulator warned in the message that they are monitoring the platform and investigating the people who are part of it.