‘Wallmart to start accepting Litecoin’
or so everyone including the Litecoin Foundation believed
The ingenious pump and dump scam may just about escape the SEC’s scrutiny
How does a normal stock market pump and dump work? You would expect the scammer to put out a fake press release announcing a small but obscure listed company is in partnership with a major global corporation, say Microsoft. The nature of such a major collaboration would naturally drive that small company’s shares up — perhaps about 35%, before Microsoft sees the news and reacts with a clarification announcing no such deal is in place. Just before it escalates to the investor’s relations team at Microsoft, and as they prepare to issue a clarifying press release, the person dumps the inflated stock, makes their millions and moves on. An ideal scam would also involve the person being far away from the US, somewhere foreign and outside the immediate reach of the SEC. But the SEC will surely be coming at them at full force, working until they are identified and possibly arrested. It would be hard to trace someone abroad, but you can be assured someone is most certainly looking for them. It would also make international news, as many investors would have been duped. Microsoft shares would probably have reacted to the news as well. While this scenario may be hypothetical, it is a fairly regular occurrence. Someone always tries to manipulate the stock market, investors lose money, the SEC goes after them.
But what happens when the scam involves an unregulated commodity? That’s when things get murky.
On the 13th of September, we bore witness to an ingeniously funny scam involving Litecoin and Walmart. Someone issued a press release via Globenews — one of the largest financial PR wires, proclaiming Walmart has entered into a partnership with Litecoin, accepting the cryptocurrency for payments. This is exactly the kind of mainstream / high-street validity that crypto bulls seek, and an acceptance by Walmart — the world’s largest retailer, would be a huge stride forward. Litecoin Foundation’s own verified twitter handle re-posted the press release, as their social media handler thought it to be true. These kinds of deals are kind of commonplace — as a decentralised cryptocurrency, anyone can start supporting and accepting Litecoin, without having to reach out to Litecoin Foundation. Even Litecoin’s Founder Charlie Lee woke up on Monday, probably thinking it was big news — as the story was widely being reported by press including by Reuters. The news also propelled Litecoin higher by nearly 33% on Monday, past $230s, as the crypto community erupted online.
People still noticed some flags and had questions — why Walmart did not make an announcement themselves, and why they went with a relatively small and obscure crypto currency, looking past the market leaders Bitcoin and Ethereum.
It had to take Walmart issuing a press release (a real one this time) to clarify the situation:
Walmart was the subject of a fake news release issued on Monday, Sept. 13, that falsely stated Walmart announced a partnership with Litecoin (LTC). Walmart had no knowledge of the press release issued by GlobeNewswire, and it is incorrect. Walmart has no relationship with Litecoin.
GlobeNewswire issued a notice across its service confirming that journalists and other readers should disregard the news release, “Walmart Announces Major Partnership With Litecoin (LTC)” issued September 13, 2021, over GlobeNewswire. All further questions should be directed to GlobeNewswire.
Meanwhile, Litecoin Foundation also deleted their tweet, after finding out the story was fake. Litecoin’s Founder Charlie Lee was also on Bloomberg TV to clarify what really happened. Not mincing any words, Charlie told Bloomberg “We try our best to not tweet fake news and this time we really screwed up, and we will try harder to not do that,”
“The thing is with Litecoin, a decentralized cryptocurrency, anyone can really start supporting it and accepting it without talking to me or without going through the Litecoin Foundation,” he said.
Noting it to be an age-old trick, Charlie added “Actually, this happens with the traditional stock market also. So, it’s not just in cryptocurrency Pretty much anyone can, if they want the price to pump, they can potentially release this fake news. So, I’m going to deny that it has anything to do with us and we’ll try our best to figure out who did it,”.
When it comes to a stock market scam, which usually involves a cheap stock, the SEC pounces on it immediately. But what do you do when an unregulated asset such as a cryptocurrency like Litecoin is involved in the pump and dump? It is outside of any regulator, and funnily the scam re-emphasises the wild-west nature of the crypto markets. So, whoever put out that press release would have seen their investment value up by nearly 33% before cashing out. Unlike the stock market which has its trading hours, manipulating the crypto market which never closes is a lot easier. Issue a convincing press release when one part of the world is closed for the night, see the value of the cryptocurrency soar as the other part of the world jumps on the bandwagon to buy, and cash out before the company wakes up to the news and issues a clarification.
An ingenious, perfect crime. Or maybe just about.
The main reason why this makes for a ridiculously funny scam is perhaps because the scammer may have thought they would be under the radar — they were not toying with the stock market for their pump and dump, and the SEC would never bother poking into something outside of its purview. For all intents and purposes, they achieved their entry and exit perfectly — manipulated the price of Litecoin by associating it with a big American retailer, probably made millions and now happily settled in Zihuatanejo, exploring the local beaches and drinking margaritas.
Unbeknownst to them, they may have accidentally manipulated the stock price of Walmart — with its stock closing 0.52% lower on the 13th of September. Enough of a reason for the SEC to come after them if they really wanted to.
Meanwhile, this has also been a major embarrassment to GlobeNewswire — one of the biggest global newswires. It had to publish a notice to “disregard” the news release and said it had put in place enhanced authentication steps to prevent a similar 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,” GlobeNewswire said in an emailed statement to Reuters.
Charlie Lee told Reuters Litecoin would implement tougher scrutiny, “We will make sure to have stricter controls on our social media accounts so that something like this doesn’t happen again.”
For now, everything seems to be okay, but regulation may soon be looming large.
In other news, ‘Cryptos Are Not Currencies, Full Stop,’ says ECB’s Lagarde.
