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Crypto of Korea: PnD Groups

It’s pronounced pee-‘n-dee, as in P and D, as in pump and dump. Morgia et al describes pump and dumps as a market manipulation fraud that consists in artificially inflating the price of an owned security and then selling it at a much higher price to other investors. The key word there being fraud. Pump and dump is the term referring to an all-too-common scenario in the crypto trading world where a coin or token suddenly and dramatically increased in volume and value, peaks at some impossible heights, then falls back down to where it started or even lower. PnD’s are one of the (many) ways in which those in the crypto trading community come off as at worst opportunistic and deviant, cynical and misled on the average, and lucky or naïve at best.

Many traders have participated in PnD events. There could be a whole book on just this topic and how traders new and old come to the speculative values that these coins have. These days they are organized in a way that isn’t meant to seem obvious but when you line up the timing of announcements that build tension in a community with the price action of certain altcoins, you see a distinct pattern. That pattern plays out still to this day. Although that last line may critically date this chapter, it’s unlikely that PnD schemes will ever end as long as there is speculative crypto trading.

These PnD schemes can begin months, weeks, or days in advance of the peak. The time frame in which the peaks are reached reveals a good deal about the reason for them. These days in 2020, PnD are done usually for one or two reasons, sometimes both.  It could be that a company is deliberately trying to draw maximum attention to themselves for a major announcement or series of announcements. It could also be that the company who issued the coin needs to raise funds. The second option was fairly common in 2017 but isn’t as ostensibly common these days. The first option is more common in 2020 based on the information that’s more readily available.

In 2017, a company would issue a statement that says that soon they would be making an announcement. On social media sites, that statement would come with some image either an infographic of some sort perhaps relating to the future announcement, a picture of the face of the company, or any random photo that the company may have had in stock. The latter image, when posted, would lead to the wildest speculation about what the actual announcement would be. The wilder the theory, the higher the pump because obviously the wildest theories would be the most potentially ground breaking for the company.

EMC2

The following is a glimpse into the mind of a speculative trader in 2017. In November and December, Einsteinium (EMC2) had a tremendous following as a result of the price action that was being advertised for it by a well-known technical analyst. This analyst had accurately predicted to the very price point where EMC2 would begin to pump, so traders began to follow her TA religiously. On November 30th, EMC2 issued an announcement about an announcement that read Big announcement to be made on December 19th with the picture of a Macbook attached. Naturally, people speculated that it would be a partnership of some sort with Apple. The company knew that issuing such a statement almost 3 weeks in advance would cause a panic among traders, which it most certainly did.

As rumblings began in the weeks leading up to the announcement about the announcement, price action saw a curious increase. Following the announcement about the announcement, there was a huge rise in the price of the coin and speculation went absolutely wild about what the announcement could be. Then *just* before the actual announcement, the price crashed.

The price of one EMC2 was just below $0.06 on November 12th, 2017. On the 29th it was just under $0.4. On December 18th, the price hit its all-time high of $2.58, then proceeded to plummet back down to $0.8 by the 30th.

Where was that TA wizard I mentioned before? Where was the accurate call to sell all your EMC2 holdings before losing all your gains? She disappeared days before the crash. Her TA mentioned nothing about the crash. As it turned out, she was being paid to make the TA calls that she made. She led countless traders right off the cliff. If you look at the price chart for EMC2 between November and January, you’ll see the cliff in reference. Traders who trusted her were out for blood but they couldn’t find an individual to persecute since she was off the grid.

People trusted her to provide accurate and sensical readings on the market for EMC2. People relied on her insights to help everyone profit. She betrayed them. You might be thinking, “Isn’t it up to the traders themselves to make their own decisions? How can they blame one person for the trades that they themselves made?”, which is a valid question and one which many toy around with in their mind on a regular basis. Although it’s true that you are the only one to blame for the trades that you yourself execute since the burden is on you to perform the necessary due diligence on an investment, the problem is one of a lack of trust. The problem in 2017 was that people were creating communities with the express intention of making profits for themselves at the expense of most or all of their standard members. In some ways, Crypto of Korea could be blamed for doing it, too.

Organized PnD Communities

2017 saw the rise of the PnD group. These were highly organized groups of traders led by a small handful of people meant to orchestrate the pump and dump of a particular coin. Most of these groups were paid; the more you paid, the higher tier membership you would earn which gave you earlier signals. Like with the EMC2 pump where one TA specialist signaled the price action to the community, leaders from PnD groups would signal to their followers that a coin pump would be orchestrated. The difference is that they would share in plain details exactly which coin, when, by how much the price would increase, and for long the pump would last.

PnD methodology

The following description of how these PnD groups operated comes from Pump and Dumps in the Bitcoin Era: Real Time Detection of Cryptocurrency Market Manipulations which is a wonderful article about this topic.

Among all the tiers in the entire community there first would be an announcement about the upcoming pump. Some rooms did this every day while others did it less frequently. They would tell members about which exchange will pump and the exact starting time of the operation down to the second, which varied depending on your tier. Sometimes the pumps would be at the same time for everyone, but those were rare. The closer you got to the pump time, the more announcements would be issued concerning it.

Only at the start of the pump would the target coin be revealed to members. This also was usually privileged information depending on your tier. At the start of the pump, members were expected to already have their buy orders set and being filled while the price rose. Shortly after that, admins would instruct members to spread the word about the pump in order to create FOMO (fear of missing out) on a great pump opportunity.

Attracting FOMO was just the beginning of the somewhat less-than-honest nature of these PnD groups. There’s no mistaking that the FOMO investors attracted by the PnD group members were just meant to be the ants that they could dump their higher-value coins on. That’s because these pumps almost always happened on coins with a low market cap that group leaders could manipulate more easily. A larger market cap required a much higher magnitude of BTC or ETH volume to get the price of the altcoin up.

When outside investors would FOMO into the coin, it would be time for the PnD group to start dumping in a cascade effect that would ironically make the pump accelerate. The PnD group members could exit the market as quickly or slowly as FOMO investors would enter. The more FOMO investors came, the better the chances of dumping everything they had bought. Once the PnD group members would finish their pump, the price would crash, leaving FOMO investors with bags.

The level of organization was and still is fairly impressive for a bunch of degenerate crypto traders.

ROK PnD

Crypto of Korea was, by definition, not a PnD group. As  mentioned earlier, the group tried hard to establish their identity as a group that did not condone discussion intended to affect market prices or sentiment, but rather to be a community that read market sentiment in real-time. That distinction was, despite all the other flaws in the group, one they managed to earn through competent management.

These PnD groups could be massively profitable with the largest ones generating millions of dollars of volume on the coins they pumped, leading to more millions in profits for those who played right. In that case, why wasn’t Crypto of Korea a PnD group, or why didn’t it become one when there was so much money to be had? That question has two distinctly different answers.

First, Chrissy, Yoonie, Jim, and the main contributors to the group, saw that the value of the group was in the fact that our discussion was widely varied and egalitarian. If we had turned it into a PnD group, the whole reason for the community in the first place would have been corrupted and many of those native English-speaking traders would have been stranded in the investing landscape. They knew that if they offered investment instructions outright, the government would crack down on them as they had already done to a few outspoken individuals. Afterall, these PnD schemes amount to nothing less than fraud. Their fearlessness in trading was matched by their fearfulness of being a foreigner in a conservative country.

With those efforts for integrity in mind, they still had individuals who took it upon themselves to rally the members to buy in times of major market movement. Those individuals in particular could not be tied down so effortlessly. One in particular – one who carries with him a deal of notoriety, was Derrick. Derrick is (present tense used here since he is still alive and kicking as of publication) a Korean-American of varying backgrounds depending on who he was talking to and when. In fact, many of the things he talked about featured interchangeable facts depending on who he was talking to and when.

Derrick

In 2017 in Crypto of Korea, Derrick was decidedly the loudest showboat – the most animated shill-piece among their ranks. He was highly active in the community, often acting as the voice of dubious reason who didn’t know what the word sell meant. He would go on about how ‘exchanges should have a no-sell setting when things are pumping so that people can’t sell and the pump doesn’t stop’ among other gems of wisdom. His style of banter came off level-headed since it was backed by a personality that offered an air of understanding. After all, he was the youngest manager at one of Korea’s largest entertainment companies and had connections everywhere, including a janitor friend at Bithumb.

That Bithumb janitor was referenced so many times that he became a meme. Derrick would start a conversation by talking about how his janitor friend overhead this or that conversation about what coin was going to pump next. At first it was curious, but it eventually became tiresome to those who had heard it before and lost. You see, with all that inside information Derrick touted as privileged information he was sharing with only us (even though Crypto of Korea was known to be tracked globally), he successfully coaxed members into buying the coins that he shilled.

Derrick represented a problem in Crypto of Korea. Being the most active member in the group meant that new members were likely to get the largest early dose of him than anyone else. That meant that they would have logged on to see him rambling about how members should go in on a coin and why. That type of banter resembled the type of discussion held in PnD groups. It was the type of banter that got groups like Diva written up in a negative light for their shill tactics.

To his credit, he was and still is an impressive shill who to this day admins a PnD group. His enthusiasm and verbal dexterity come off as confident and experienced. In 2017 with all new traders, those were important traits to exude. He used that charm over the course of just a few weeks to garner a cult of followers within Crypto of Korea who hung on his whims like gospel. Those traders needed someone to trust since they didn’t understand the market. They needed real help to navigate the turbulent ups and downs of each coin, not a carpetbagger.

Derrick prayed on the naivete of the traders in that chatroom with his inherent charm. Looking back at the text of the chat to research for this chapter revealed how transparent his shills were. He would claim to have taken out a large position on a coin then encourage others to buy with him. By encourage, it is largely meant: coerce. Observe this actual banter taken from the chat group.

Derrick: BTC – is pumping
Joe: Watching BTC/BCH closely
Dubai: wtf is this madness lol
Derrick: bitcoin cash is holding so so so strong
Derrick: we need a janitor
Derrick: joe
Derrick: get on board NOW
Derrick: WE NEED YOU!! Join
Derrick: it’s at very good price

Derrick: FUCKKKK YESS!!!!)@IK!)@K!@K!POKOPDAKFPOKD FOPAKSD POFKSAPODFKAOPDSKF OPASKD FOPAKSDOPFKA SPODKFAP OKDSFPO AKSDPF KASOPDFK ASOPDKFAOPSDKFAOPSKDFOPA KFPAOKF OPAKF OPAKF AK
Jason: okay now im on board bch

Over time this tactic got him into some trouble with other members of the group who insisted Chrissy and Jim intervene in some way. Chrissy didn’t care about the banter but personally hated Derrick. On one hand, Derrick was a rabble-rouser who upset several valued members of the group but not really enough, in Jim’s eyes, for it to be an actionable complaint. On the other hand, he was generating a lot of traffic. Such a predicament makes the Twitter handling of Donald Trump seem understandable. Jim told Derrick in person a few times to tone down his rhetoric; when he encountered aggressive push-back from people who were unhappy with him, Jim wouldn’t intervene to stop it.

Typical PnD groups are paid, although some are free for all or for lower-tier members. Crypto of Korea was not meant to be a PnD group but Derrick used it as a platform for his own gains. Whereas most members shared tips they heard or shared analysis made equally among the group, Derrick made it his own personal cult of personality.

WaLTa: how high do you guys think bch will go?
WaLTa: I want a good entry but think it’s still kinda high here if the goal is 2.5ish
Derrick: honestly
Derrick: right now is probably an excellent buy in
Derrick: (not trying to make you fomo in)
Derrick: literally, the price is nice, and stabilized here

The similarities between his tactics and the known tactics of PnD groups tell the whole story. Whenever he engaged in a long conversation, it would be about shilling a coin, just like in PnD rooms where members know what to expect from announcements made to the room. He would encourage members to buy into that coin at a particular time, usually quite suddenly, because the pump was impending. Then he would get as many stragglers as possible to join in while he could with the promise of riches that usually betrayed his need for FOMO investors. Anyone who didn’t join in was given the sense that they had let down the group with the chance for redemption next time.

Derrick: Omg troy, you are leaving the xrp train?

Prescient Dangers

One theory has already been explained about how the Bitcoin Bubble was hyperinflated in Korea. The Kimchi Premium is evidence enough of the fact that something was amiss here. Just take a look at a side-by-side of Bithumb charts against any other non-Korean exchange. That Kimchi Premium was evidence of other cultural traits about South Korea that others would likely not have picked up on: that of the FOMO.

In the context of the office buildings where hundreds of people work on a floor and answer to a handful of other people, FOMO can be highly influential. Koreans are highly susceptible to its influences and to inflicting it on others inasmuch as their position in the relative social hierarchy allows. If your boss tells you to buy XRP, you better do it if you enjoy being employed. In Korean-language crypto chats, it’s not quite the same.

These days the FOMO-heavy chats in Korea are much less common than they were. In 2017 they were populated with toxic, abrasive, aggressive individuals who demanded to be listened to. Their chest beating on predictions that they may or may not have made gave them self-evident dominion over chats at times that wouldn’t be challenged without a fight. It’s easy to do this behind a screen. Ridiculing someone into making an investment on a highly speculative asset like an altcoin brings with it severe consequences that someone must be responsible for, however.

Individuals in these FOMO chats would read about a new coin that is bound to pump but realize they had limited funds available because of the other opportunities they had missed or had misread. The thought process is emotionally driven and almost entirely illogical unless rationalization counts as logic. “This one will at least bring me back to even. I can’t lose. Everyone is going in on it!” Is the way most FOMO investors think. In those Korean rooms, anyone who dares point out the flaws in the investment’s capabilities to make everyone rich are met with fierce resistance.

Rather than leaving the room and missing out on the information that the room may share in the future, the subjugated individuals would stay and tolerate the abuse they received for failing to conform. Not to oversimplify, but this is a common method of social conditioning used in South Korea.

In regard to the power of FOMO and a single person having the authority to lord over another by virtue of their advanced age – sometimes by mere weeks – people’s lives were ruined. Later you will read about one such person who, under the guidance of ‘friends’ had to take out a loan in a family member’s name because they weren’t eligible for any more credit. They used that money to buy XRP around its height, only to see it crash magnitudes lower than the point they had bought it at, thereby losing the loan money and driving their family member’s credit rating into the dirt.

Derrick was as guilty of creating FOMO as anyone. That isn’t to say that he was the only one in Crypto of Korea pressing FOMO onto other members. Even at times admin Jim would get swept up in the charts he read, then exuberantly proclaim that members should buy a coin. Derrick, however, told a story about his personal friend – one whom he worked with, who was driven nearly to taking his own life because of the FOMO pressure put on him.

Derrick had apparently told his friend about the opportunity to make hefty profits in crypto trading but the friend balked at the idea citing reports in the news of how dangerous it could be. His friend was right to back off if he wasn’t ready for it. Derrick pressed him on. Pressed him again and again. Pressed him to the point that his friend put his entire life savings and money from a small loan he had taken out into a coin. In all, his friend had invested about $100k into an asset class he had no idea about because Derrick had pressed him so hard. Members knew how heavy Derrick could lay it on when he really wanted to which is why so many members of Crypto of Korea were still holding BCH.

His friend went all-in on a coin that had dipped a bit and was stagnating. It hadn’t moved until it dropped some 50% in a day, which cryptos are wont to do when the market cap hovers around a hundred million while trading volume decreases. According to Derrick, his friend was lugubrious, depressed, sloth-like, and probably contemplating killing himself. The threat of suicide was confirmed when the friend sent Derrick a letter to that extent, a suicide letter, saying that it wasn’t Derrick’s fault (even though it clearly was).

Chrissy: Btw [Derrick]… your FOMO is probably the reason your friend is going to kill themselves.

Derrick took offense to the comments that members made about his culpability in the matter. He later feigned sympathy for his friend but remained perturbed that the group would chastise him for the toxic behavior he was capable of and had obviously exerted on his ‘friend’. He was likely getting his information from Korean PnD groups who forced each other to FOMO with such ferocious pressure that members committed suicide after FOMOing into a coin and losing. It was such a common thing that it became a meme that if a coin dips too low, you would have to jump into the Han (River).

Similar tactics are used to get people to buy into stocks. It isn’t a new game. It isn’t a new field of work – FOMO. The weaponization of it in synchrony in the crypto trading realm was brand new. To the very young people, some teenagers who were using their college loans to invest, the skilled FOMO masters couldn’t be ignored. Same for the naïve and gullible noobs who were incapable of reading a room. They took the bait and ended up with bags that they would then need to carry around like an albatross around their neck. Just as the ancient mariner did, they too will surely tell their story of the 2017 FOMO they succumbed to for the rest of their lives. By now many have shaken the curse and come to understand the technology behind what they were playing with.

As the Bitcoin Bubble burst, that ship crashed against the shore leaving the vast majority worse for the wear. There isn’t enough shame that FOMO masters can feel for their part in ruining people’s lives. In Korea, they take to it with sneaky orchestrated attacks like the one on the leaders of the most popular PnD group Diva who flaunted the riches they had pilfered from FOMO investors at luxurious night clubs during their weekly member parties. Now Diva members will not reveal their involvement and the admins themselves have successfully erased a great deal of the evidence that they even existed at all; but that albatross remains strung around their necks and will never be completely shaken away for the harm they caused.

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