Contagious Crime : How Cryptocurrency Manipulation Spills into Stocks

We show that a type of market manipulation popularized in cryptocurrency markets is now also found in stock markets, an effect we term “crime contagion”. Manipulators gather traders in pseudo-anonymous online forums (e.g., Telegram) where they co-ordinate pump-and-dump attacks on stocks, mirroring schemes conceived in cryptocurrencies. We find such manipulations in Australia, India, and the US during 2020–2022. They generate millions of dollars of trading and returns of 26%–107%. We find direct regulatory intervention in forums is effective in curbing this activity. The findings illustrate a negative externality of unregulated markets: breeding misconduct that spills into other markets