Perseus: Tracing the Masterminds Behind Cryptocurrency Pump-and-Dump Schemes

Abstract

Masterminds are entities organizing, coordinating, and orchestrating cryptocurrency pump-and-dump schemes, a form of trade-based manipulation undermining market integrity and causing financial losses for unwitting investors. Previous research detects pump-and-dump activities in the market, predicts the target cryptocurrency, and examines investors and osn entities. However, these solutions do not address the root cause of the problem. There is a critical gap in identifying and tracing the masterminds involved in these schemes. In this research, we develop a detection system Perseus, which collects real-time data from the osn and cryptocurrency markets. Perseus then constructs temporal attributed graphs that preserve the direction of information diffusion and the structure of the community while leveraging gnn to identify the masterminds behind pump-and-dump activities. Our design of Perseus leads to higher F1 scores and precision than the sota fraud detection method, achieving fast training and inferring speeds. Deployed in the real world from February 16 to October 9 2024, Perseus successfully detects 438 masterminds who are efficient in the pump-and-dump information diffusion networks. Perseus provides regulators with an explanation of the risks of masterminds and oversight capabilities to mitigate the pump-and-dump schemes of cryptocurrency.

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