Crypto pump-and-dump uses Litecoin and Walmart to dupe investors
(Kitco News) - A short-lived pump-and-dump scheme that thrust Litecoin and Walmart into the spotlight over a fake partnership rocked the cryptocurrency markets Monday.
Bad actors published a fake press release on GlobeNewswire pretending that Walmart had teamed up with Litecoin. It wasn't long before several major news organizations picked up the story.
Cryptocurrency market leaders were quick to call out the fake news early, but not before the markets had reacted. The Litecoin price skyrocketed nearly 30% at first as signs of wide-scale cryptocurrency adoption appeared to be within grasp. Even the Bitcoin price, which has been stuck in the doldrums of late, started inching higher.
Shocking and Devastating
Ed Moya, senior market analyst at Oanda Corp, has been covering the cryptocurrency space since 2014. Moya told Kitco News that he was shocked by the scam and described it as "devastating," adding:
"There was a delay in refuting this story, and there are a lot of people that have been burned badly by this. It could do some long-term harm for some new cryptocurrency investors."
On the other hand, the markets will undoubtedly bounce back.
"In the world of crypto, volatility is widely expected. The industry is well known for scams and fraudulent schemes and exchanges that go down. So, the cryptoverse will be able to survive this event," Moya said.
While investors might not be overly spooked, regulators are no doubt watching.
"The calls for more regulation are just going to grow," said Moya.
He added that the decision to target Litecoin was a well-calculated one by the scammers.
"It's not on a lot of people's radars. This wouldn't fly for Bitcoin, Ethereum, Cardano or even Dogecoin. Take a look at Litecoin's market cap. It's one-third the size of Dogecoin. The potential for market manipulation was so much greater there. You knew this would be a one-way trade. There are no other drivers for Litecoin," he said.
Moya further explained that the investor response goes to show the "tremendous amount of enthusiasm for when the next major American corporation will embrace crypto."
Back in July, there was confusion over whether Amazon would accept Bitcoin payments, which the e-commerce giant denied.
"There's this buzz that you're going to get more companies accepting cryptocurrencies as payment. The bad players took advantage of this. Most likely, this was a very easy setup where they were able to pump and dump it because they knew it was going to get refuted. No doubt once they saw the initial 30% surge, they were going to fade this move and they were going to write it down. It was very easy," explained Moya.
Once the Litecoin price began to drop again, and it became apparent that any partnership was fake news, the bad actors jumped ship. But as Moya said, "the damage was already done."
He suspects that the people behind the scam were most likely on exchanges and at brokers that offer leverage on these assets to amplify their returns.
Adding fuel to the fire in Monday's press release scam, a Litecoin social media team member saw the development reported by a major news outlet and tweeted the story from the official Litecoin account, exacerbating an already precarious situation. Litecoin has since deleted the tweet and put the kibosh on any Walmart partnership scuttlebutt.
The Litecoin Foundation has not entered into a partnership with Walmart.- Litecoin Foundation (@LTCFoundation) September 13, 2021
After rallying by a double-digit percentage, the Litecoin price is currently down 2%. Bitcoin is down a similar percentage and trading at $44,676.