Pump.fun promotes itself as a “fair launch” platform for token creation, but unfortunately, scammers have found ways to exploit this system. Despite its safeguards, the platform has become a breeding ground for fraudulent schemes, deceiving investors with various tactics. In this post, we’ll highlight five common scams you may encounter on pump.fun and provide tips to help you avoid them.
1) Wash Trading
Wash trading is the practice of repeatedly buying and selling the same token to create the false impression of high trading volume. This manipulative tactic makes a token appear in high demand, leading to inflated prices. On pump.fun, you can identify wash trading by looking for frequent transactions between the same wallets. These wallets are often new, with no history, and may acquire tokens without actually purchasing them.
How to Spot Wash Trading:
Watch for repetitive transactions between the same wallets.Be wary of newly created wallets with no prior history.Check if tokens are actually purchased or just transferred between wallets.
2) Volume Bots
Volume bots are automated programs that generate fake trading activity. Scammers use them to create a false sense of demand, mimicking the effects of wash trading but on a larger scale. Volume bots often perform small, high-frequency trades, making it hard to distinguish between legitimate and artificial activity.
How to Spot Volume Bots:
Look for trades happening in rapid succession at regular intervals.Check for new wallet addresses involved in these trades.Pay attention to small transaction amounts (e.g., 0.01 SOL traded repeatedly).
3) Microbuys
Microbuys are small, genuine purchases made regularly over time to simulate steady, organic interest in a token. While each individual purchase may seem insignificant, the regularity of these transactions creates the illusion of a growing community. This tactic is designed to mislead investors into thinking the token is gaining traction.
How to Spot Microbuys:
Look for frequent, small purchases over a short period.Check the diversity of wallets making these purchases; genuine activity typically comes from a variety of wallet types.
4) Bundled Transactions
Bundled transactions involve executing multiple buy and sell orders at the same time. Scammers use this tactic to consolidate tokens from fake wallets into one central wallet, then sell them all at once, causing a market crash. The rapid sell-off devalues the token, leaving legitimate investors with worthless assets.
How to Spot Bundled Transactions:
Look for large sell orders happening suddenly in the transaction history.Check which wallets received large amounts of tokens before the sell-off.Use a Telegram bot to monitor token contracts for bundled transactions.
5) Clone Token Contracts on Raydium
Scammers can exploit the delay between a token’s launch on pump.fun and its transfer to Raydium (a partner exchange). During this window, they may create a cloned token with the same contract address as the legitimate one, tricking investors into buying the fake token instead. These cloned tokens often have little or no liquidity, unlike the original token.
How to Spot Clone Tokens:
Cloned tokens usually have little to no liquidity, while real tokens have enough SOL in their contract.Compare the token’s details and contract address with the official project’s social media accounts to ensure authenticity.
Is Pump.Fun Safe?
Although pump.fun is a legitimate platform for creating tokens on the Solana blockchain, it is not free from scams. To stay safe, always conduct thorough research before investing. Check wallet activities, spot potential wash trading, verify token contracts, and ensure you’re not buying into cloned tokens.
Conclusion
Pump.fun offers unique opportunities for creating tokens, but the platform’s vulnerabilities make it a target for scammers. By being aware of common scams and following best practices, you can better protect yourself from fraudulent schemes. Always do your due diligence—research wallet activity, verify token details, and double-check contract addresses before making any investment.
Stay informed and cautious as you explore the crypto space!