E-sports group FaZe Clan is distancing itself from gamers accused of running a ‘pump and dump’ crypto scam
FaZe Clanmade history last month by being the first ever gaming organisation to grace the cover of Sports Illustrated magazine.
- This month, four of their members are being scrutinised for running a ‘pump and dump’
- They allegedly pumped up the value of an altcoin called ‘Save The Kids’ and then sold off their holdings causing the tokens’ value to plummet.
AdvertisementAn e-sports group called the ‘FaZe Clan’ has fired one of its members and suspended three others amid allegations of running a ‘pump and dump’ cryptocurrency scam. Outside the crypto world, it’s what you would call a ponzi scheme.
A statement from FaZe Clan. https://t.co/HnPXpAoSYX— FaZe Clan (@FaZeClan) 1625183019000
This means that these influencers ‘pumped up’ the price of an altcoin, also called ‘meme coins’ or ‘sh**coins’ by getting their followers to invest in it. Once the price soared up, the influencers sold their holdings — or dumped them — causing its value to fall suddenly, leaving smaller investors in a lurch.
The worrying factor is that these schemes are becoming all too much in the world of crypto and those who aren’t familiar with how blockchain works can end up losing their savings in such scams.
The crypto industry is no stranger to influencers. In fact, considering that the value of a lot of coins is speculative, influencers have a bigger sway over prices than in other sectors of the economy — take what happens to the value of Doge, Baby Doge or Bitcoin, whenever Tesla and SpaceX CEO Elon Musk puts out a tweet.
But, as the cliche goes, with great power comes great responsibility. And, the misuse of trust can turn the tables on you, which is what happened with four FaZe Clan members.
Who is the FaZe Clan and what did they do?
The FaZe Clan is a professional e-sport and entertainment organisation based out of the US. It includes players from around the world who play various games like Call of Duty, PlayerUnknown’s Battlegrounds, FIFA, Fortnite Battle Royale and others. They made history earlier this month by being the first ever gaming organization to grace the cover of Sports Illustrated magazine.
FaZe was founded back in 2010 by three YouTubers but now has expanded to over 80 members — all with their own fan following amounting to tens of millions of followers.
However, four of these members — Kay, Jarvis, Nikan, and Teeqo — have been accused of running ‘pump and dump’ schemes. The most recent incident, which led to Kay being kicked off the FaZe Clan while Jarvis, Nikan and Teeqo have been suspended, had to do with an altcoin called ‘Save The Kids’ ($KIDS).
FaZe Kay has been accused of potentially doing this not just once but multiple times in the past — and he's not the only FaZe member.
One of the founders of the FaZe Clan, FaZe Banks, has also been caught in a controversy to do with an altcoin called BankSocial, which he promoted through a giveaway in May. BankSocial rose in value right after Banks' promotion and then promptly plummeted — losing 90% of its value — after many big early investors sold off.
A scam masked as a charityThe $KIDS cryptocurrency was built on the Binance Smart Chain (BSC) and positioned itself as a charity token. The promotional video promised to ‘redistribute wealth’ to both holders and charities.
Many of the group's fans put their money into the scheme, believing their investment was protected and being leveraged for a good cause, only to see it disappear overnight.
The shady inner workings of how users may have been scammed was first pointed out by YouTuber OrdinaryGamers. His investigation into the altcoin, and the people behind it, showed that not everything was on the up-and-up.
AdvertisementKay, Jarvis, Nikan, and Teeqo, all tweeted out in support of the altcoin at around the same time to create a hype around the alcoin. But, shortly after, the tweets were all simultaneously deleted as the price of $KIDS took a nosedive.
What is the pump and dump model?In a pump and dump operation, the perpetrator makes a profit by pumping an asset into the market. Pumping here means to increase the demand for something by marketing it, in turn also increasing its value — like sending out a bunch of tweets promoting a particular altcoin.
When the coin is worthy enough, the perpetrator sells their holding, which is called dumping. It's a direct manipulation of supply-demand based market dynamics.
Scammers usually target new or unpopular coins since information about the blockchain isn't easily accessible. And, for those who don’t do their research, promises of ‘reaching the moon’ sound like an easy way to make a quick buck.
For a newcomer or someone who got inspired by an influencer, it isn't straightforward to figure out the authenticity of a blockchain. On the other hand, creating a brand new altcoin is relatively easy for someone who understands how blockchains are floated. This divide in financial literacy is where influencers can take advantage of the system.
This would be illegal but regulation is still playing catch up
Pump and dump schemes are illegal and can attract the authorities attention in a regulated industry like the stock market.
But cryptocurrencies are unregulated globally, and governments are still trying to figure out a solution. Decentralised finance as a concept often clashes with the conventional fiat system, which is profoundly centralised and controlled to avoid instability.
Crypto exchanges usually suggest that users should stay away from new or obscure
Popular on BI
- I've had the new iPhone 14 for 2 weeks. I should've listened to Steve Jobs' daughter because I now regret buying it.
- China tells state banks to prepare for a massive dollar dump and yuan buying spree as Beijing's prior interventions have failed to stem its currency's worst year since 1994
- Here is a list of bank holidays in October 2022
- IISC joins hands with AIIMS Rishikesh to develop algorithm that can read brain scans to detect epilepsy
- Overlapping symptoms of dengue, Covid-19 confusing in many cases, say doctors
- Sterlite Technologies launches optical solution for 5G rollout
- NASA pushes back Artemis I Moon mission launch to November
- Auto sales jump in September: Maruti reports over a 100% jump in volumes