In its recent announcement, the CFTC (Commodity Futures Trading Commission) warned investors about Pump & Dump schemes (P&D) which we've covered here in detail. P&D schemes are generally done on altcoins which have a small market cap and small total supply. The CFTC says investors shouldn't buy cryptocurrency based on their price spikes or their promotions on social networks, but should rather educate themselves on how to recognize hype from fact.

P&D schemes are well known criminal endeavors from the unregulated days of the stock market where several bigger investors agreed to buy a company's stock in large amounts, thereby inflating its price. Once small investors notice this price rise, they'll be drawn to the asset and will purchase based on hype and FOMO, further pumping the price. The investors who started the scheme then sell their own pre-purchased assets to these new investors, netting a hefty profit on the difference, crashing the price (the dump phase). Small investors who fell for the scheme then become bagholders.

This used to be much harder to organize. With the flourishing of social networks and rapid rise of chat apps, running schemes like these has never been easier. All one needs to do is open a social network or chat app group, get enough users, and talk them into buying a specific coin. We've covered this process in detail here.

Due to large losses sustained in schemes like these, small investors have often messaged the CFTC. The CFTC has no jurisdiction yet in this unregulated economy, so it's still up to the users and enthusiasts to stop the scammer – even some exchanges do their best to put an end to them, sometimes blocking the accounts of the organizers or participants when detected.

The CFTC has thus taken another approach at putting a stop to the P&D schemes – due to the fact that all such groups are anonymous, the CFTC promises 10-30% of any monetary damages charged to the scheme organizers should an investigation be conducted and an arrest be made. In other words, there's now a bounty on P&D schemers' heads. If you're a member of one such group and can contribute to an investigation or open a new one, feel free to let the CFTC know.

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