Key Takeaways
- Pump.fun promises a “fair launch” experience but the platform has become a hotspot for different types of scams.
- Some of the most popular pump.fun scam tactics include wash trading and volume bots, both simulating demand and inflating prices.
- Microbuys mimic organic buying, bundled transactions consolidate tokens for a sudden sell-off, and cloned token contracts trick investors by imitating tokens.
- To avoid scams, investors should research wallets, identify wash trading patterns, verify token contracts, and confirm liquidity and authenticity.
Pump.fun has turned into a hub of activity on the Solana blockchain, with thousands of new token projects launched every day. The platform markets itself as a “fair launch” ecosystem that includes safeguards against crypto scams, promising investors a safer experience. Yet despite these claims, pump.fun scam tactics are rife, with the platform offering a breeding ground for rug pulls.
As more pump.fun scams come to light, you might be questioning the platform’s reliability. How do these scams work, and how can you avoid them?
In this article, we’ll cover some of the most common tactics scammers use on pump.fun and the steps you can take to protect yourself.
5 Pump.Fun Scams Tactics to Know About
Despite pump.fun’s promises of fairness, scammers have developed creative ways to exploit the platform’s ecosystem. These tactics are designed to trick investors, artificially inflate token value, and ultimately facilitate rug pulls. Below are five of the most common scams to watch out for and how to identify them.
1) Wash Trading
Wash trading involves buying and selling the same token repeatedly to create the illusion of high trading volume. This artificial activity tricks investors into believing the project is in demand, which drives up the token’s price.
On pump.fun, you can often spot wash trading in a project’s transaction history. At first glance, many tokens might seem like they have genuine trading activity. Upon further investigation, you might notice that it’s just the same few wallet addresses repeatedly buying and selling tokens. Those wallets are often freshly created for this purpose and usually don’t have any prior transaction history.
In addition, fake wallets might acquire tokens without actually purchasing them, further muddying the waters. These wallets are often called insiders and they either belong to the developer/creator of the token or some of his associates.
To spot wash trading on pump.fun:
- Look for repeated transactions between the same wallets.
- Check the wallet creation date, new wallets with no prior activity are red flags.
- Investigate whether wallets acquired tokens through actual purchases or transfers.
2) Volume Bots
The use of volume bots is another common pump.fun scam tactic. Volume bots are automated programs used to generate fake trading activity. These bots mimic the effects of wash trading but on a larger and much faster scale. When used legitimately, volume bots can create interest in a token, helping it stand out from the crowd on pump.fun. However, scammers often deploy them as part of a larger rug-pull scheme to give the appearance of overwhelming demand.
By automating token transfers between wallets, volume bots can make it challenging for newcomers to differentiate between real and artificial activity. The result is a misleading representation of the project’s popularity. One major giveaway is that volume bots often make very small trades of the same amount. For example, buying and then selling 0.01 SOL over and over.
To spot volume bots on pump.fun:
- Look for unnatural transaction patterns, such as high-frequency trades in small intervals.
- Investigate the wallet addresses involved, bots often operate across wallets with no prior activity.
- Pay attention to the frequency and the amount sold.
3) Microbuys
Microbuys involve small, genuine token purchases made at regular intervals. While each transaction is for a minimal amount, the consistent buying creates the illusion of sustained interest in the project. This is also what differentiates microbuys from volume bots: where volume bots constantly buy and sell within the same second, microbuys tend to buy and hold the token.
This tactic is particularly effective because it can mimic the behavior of organic buyers. For unsuspecting investors, micro-buying signals confidence in the project. However, the reality may be that the buys are orchestrated by the scammer to generate artificial momentum.
To spot micro buys on pump.fun:
- Look for frequent purchases of very small amounts over a short period.
- Examine the transaction history for wallet diversity, genuine activity often involves a mix of wallet types.
4) Bundled Transactions
A bundled transaction is a transaction in which multiple different buy and sell orders are executed simultaneously – and they are often used on pump.fun as part of a rug pull.
As we’ve explained above, malicious projects often use multiple fake wallets to create the illusion of trading volume and generate value. Once the scammer is ready to cash out, a bundled transaction allows them to consolidate all the tokens from their fake wallets into a central wallet for a single, devastating sell order. This floods the market with tokens from the project, leaving genuine investors holding worthless assets.
The scary part here is that the transfer of the tokens and the sell order happen simultaneously. This makes it impossible for investors to react before the sell-off.
The impact of a bundled transaction sale is often catastrophic for a token’s value. In rare cases, since the developer/scammer is out of the equation, affected token holders decide to keep the project going through a community takeover. However, it’s best to not be in that situation in the first place.
To spot bundled transactions on pump.fun:
- Look for sudden, large sell orders in the transaction history.
- Identify wallets that receive large amounts of tokens shortly before the sell-off.
- Use a telegram bot to manually check the token contract for any bundles.
5) Clone Token Contracts on Raydium
Not all pump.fun scam tactics take place within the platform, some involve a DEX like Raydium, pump.fun’s partner exchange. Each token is launched on pump.fun begins its journey at a market cap of $5,000. It then follows a “bonding curve” and needs a specific market cap before it “graduates” to Raydium. At the time of writing the bonding curve requirement sits at $93,660. Once a token reaches that market cap, it’ll be automatically transferred to Raydium DEX, giving the project a lot more visibility and access to more traders. This means that genuine pump.fun tokens arrive on Raydium with significant liquidity already in their contract.
However, the transfer from pump.fun to Raydium isn’t instant, and this gives scammers an opportunity to create a fake token and fool investors. Bad actors can use the window of latency to launch a token with the same contract address as the real one, and launch it to Raydium – the idea is to get you, the victim, to buy into this clone project instead.
How to spot it:
- One clear giveaway here is that the fake token will almost always have little to no liquidity. The real token will have a sufficient amount of SOL within the contract.
- Compare the project details and contract address on the official social media accounts for the token.
Is Pump.Fun Safe?
While pump.fun offers exciting opportunities for token launches, the platform is not immune to scams. Conducting your research is essential for safeguarding your investments. Here are a few tips to make trading on pump.fun safer:
- Beware of Fake Wallets: Always investigate transacting wallets. Newly created wallets with no prior activity may indicate insiders and fraudulent activity.
- Spot Wash Trading: Dive into the transaction history to check if wallets are actually buying tokens or simply transferring them between themselves.
- Verify Token Contracts: Double-check the contract address of any token on platforms like Raydium and the project’s socials to ensure you’re not buying a clone.
Is Pump.fun Legit?
Pump.fun is a legitimate tool for creating tokens on the Solana blockchain. It allows users, even without any programming experience, to create a crypto token in just a few minutes. While scammers may have found ways to exploit the “fair launch” safeguards, the platform and its creators haven’t been directly involved in any suspicious activity. Even though pump.fun is legit, users can create both genuine projects and scams. Always keep an eye out and verify project details before investing in pump.fun memecoins.
Closing Thoughts
While pump.fun can offer legitimate opportunities, navigating it requires caution, skepticism, and a good understanding of the platform’s vulnerabilities. Getting to grips with pump.fun scam tactics is essential information if you’re planning to interact with the platform.
As the ecosystem develops, the tactics used to deceive investors will no doubt become more sophisticated. So before you invest in a meme token, conduct proper due diligence, examine wallet activity, and verify token contracts. All of these proactive measures will help keep your crypto safe as you explore the space.
