This blog has reported all year on the myriad cryptocurrency investigations being conducted by state and federal government agencies along with national media outlets (e.g. from February; from April; and from May). The latest investigation comes from the Wall Street Journal, which alleges to have found "175 pump and dump schemes involving 121 different digital coins, which show a sudden rise in price and an equally sudden fall minutes later." Although the report suggests that "manipulations of cryptocurrencies are no different" than alleged pump and dump schemes in publicly traded stocks, this type of investigation may only be possible in the cryptocurrency market. Telegram and Discord, which were central to the Journal's methodology, offer go-to crypto-centric platforms, where pump organizers can anonymously execute their plans and capitalize on an unsettled regulatory regime for crypto-trading. Those or other platforms have yet to be used in an analogous fashion for publicly traded stocks, possibly because of the more robust regulatory regime surrounding traditional exchanges and possibly because of the mania surrounding cryptos. Thus, the Journal was able to find the kind of pre-litigation corroboration for a pump that generally has not existed for publicly traded stocks.
The report raises some interesting questions:
Blockchain technology utilizes a distributed digital ledger to record and track information, and can be leveraged to gain transparency and certainty in transactions ranging from cryptocurrency to supply chain tracking. This blog provides information on the legal developments surrounding implementation of blockchain technology, with an initial focus on the financial services sector.