Analysis: As Pump and Dumps Go, Bogus Walmart Announcement Was Wildly Successful
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Analysis: As Pump and Dumps Go, Bogus Walmart Announcement Was Wildly Successful

9 months ago

There were a couple of pretty broad indications that the announcement was a scam.

Analysis: As Pump and Dumps Go, Bogus Walmart Announcement Was Wildly Successful

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As pump-and-dump scams go, the September 13 press release announcing a partnership between Walmart and Litecoin was wildly successful.

It came over the Globe Newswire, generally a reliable source for press releases, and was picked up far and wide, by the likes of CNBC, Reuters, and Bloomberg, to say nothing of cryptocurrency media and even the Litecoin Foundation’s own Twitter account. The latter went on to say:
“One of our social media team members was a little too eager and shared the story from the Litecoin Twitter account.”
The press release announcing a partnership between Walmart and Litecoin sent the cryptocurrency up 27% in 20 minutes — from $175.51 at 9:30 a.m. EDT when it was published to $233.06 at 9:50 a.m. — and down just as fast.
This means someone very likely made a LOT of money, and a lot of people likely lost a lot of money. While options aren’t really as much of a zero-sum game as they appear to be — hedging and side strategies can mitigate the I-win-you-lose aspect of these trades — that was a mighty big jump to be hedged against.
Asked whether the agency was probing the matter, a spokesperson for the Commodity Futures Trading Commission (CFTC) said only that “as a matter of policy, the CFTC does not confirm or deny, nor speak in any way to the existence of investigations.” An SEC spokesperson said much the same thing.
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Questionable Content

There were a couple of pretty broad indications that the press release was a scam.

For one thing, the email provided for the media contact used the domain @walmart-corp.com. That led to a Namecheap page offering to sell the URL when typed into a browser on Monday morning, but now leads to a blank page. That’s not always something writers look at in the-race-to-be-first media age.

For another, the media contact listed was William White, the SVP and Chief Marketing Officer of Walmart — the No. 1 company on the Fortune 500 — who is too senior to be the press contact on a release announcing that Walmart was buying Arkansas outright, to say nothing of a cryptocurrency deal. He oversees all marketing for a company with 10,500 stores and eCommerce sites in 24 countries, serving 220 million customers a week.

That said, while it’s not the best-known cryptocurrency, decade-old Litecoin isn’t so unreasonable a choice for this kind of scam — at least from a crypto industry insider perspective. After all, PayPal selected LTC as one of the four cryptocurrencies it offered account holders the ability to buy and sell in November, along with Bitcoin, Ether, and Bitcoin ​​Cash. 

However, it also seems unlikely that a company as large as Walmart, and with as broad a demographic as Walmart, would completely ignore Bitcoin, which is far, far better known among the general public. Indeed, in covering the story after the hoax was revealed, a Bloomberg crypto reporter said: 

“I haven’t heard of Litecoin in many moons.”

Globe Newswire, which appeared to be the initial source for the fake article, told CoinMarketCap that it promptly withdrew the press release and issued a Notice to Disregard as soon as it realized that a fraudulent user account was imitating Walmart. However, the announcement was online for about two hours before this happened. A spokesman added:

"This has never happened before and we have already put in place enhanced authentication steps to prevent this isolated incident from occurring in the future. We will work with the appropriate authorities to request — and facilitate — a full investigation, including into any criminal activity associated with this matter."

Screwed Up

Charlie Lee, the cryptocurrency's creator and the managing director of the Litecoin Foundation, told Bloomberg that the group “really screwed up” by tweeting out the scam news — adding that it has upgraded its compliance procedure for tweets. He added that the foundation is a non-profit, so it doesn’t gain anything from pump-and-dumps — which is true so far as it goes. 

Lee himself was widely criticized for selling all of his Litecoin in December 2017 after it spiked during the first crypto boom, causing the price to collapse. At the time, he said he did it to prevent the perception that he was pumping his own holdings when tweeting about Litecoin. He was asked pointedly by Bloomberg about his own Litecoin holdings on Tuesday, which he said are roughly 20 LTC. 

Pump and dumps have a long tradition in crypto, with the Wall Street Journal in August 2018 reporting that 175 pump and dumps generated revenues of $825 million. Among the most recent is July’s Save the Kids coin scam, which saw four members of the popular esports FaZe Clan team suspended or fired for promoting the alleged charity coin, which dropped 90% in days.

That said, Mati Greenspan, founder of crypto research and analysis firm Quantum Economics, pointed out that there could well be “some element of trolling for shits and giggles.” He added that whether the person or persons who created the release “made money by playing the market with accurate timing is currently unknown.”

Another Regulation Argument 

The incident comes in the wake of Securities and Exchange Commission Chairman Gary Gensler’s recent comments about regulating decentralized finance (DeFi) and the agency's threat last week to sue Coinbase if it launches a planned lending product.
On Sept. 14, Gensler is scheduled to testify before the Senate Banking Committee for a scheduled agency oversight hearing. 

In his prepared remarks, released on Monday and almost certainly written well in advance, the former MIT cryptocurrency and blockchain professor repeated his opinion that there is not enough investor protection in any aspect of crypto, including finance, lending, and trading, as well as coin issuance. He said:

“Frankly, at this time, it’s more like the Wild West or the old world of ‘buyer beware’ that existed before the securities laws were enacted. This asset class is rife with fraud, scams, and abuse in certain applications.”

The problem, he added is the lack of clear regulation, he added — a refrain common in the cryptocurrency industry. 

“Large parts of the field of crypto are sitting astride of — not operating within — regulatory frameworks that protect investors and consumers, guard against illicit activity, and ensure financial stability."

He added: “We can do better.”

Care to bet whether the Walmart-Litecoin pump and dump will be discussed, either by Gensler or by a senator overseeing the SEC?

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