Gaming collective FaZe Clan has taken action against some of its members who have been promoting pump and dump cryptocurrency scams.
According to a statement released on July 1st, FaZe Clan has made the decision to drop Frazier “FaZe Kay” Khattri and suspend Jarvis “FaZe Jarvis” Khattri, Nikan “FaZe Nikan” Nadim, and Jakob “FaZe Teeqo” for their involvement in promoting cryptocurrency scam ‘Save the Kids’.
“FaZe Clan had absolutely no involvement with our members’ activity in the cryptocurrency space, and we strongly condemn their recent behaviour,” their statement said via Twitter. “The trust and respect of our fans has been, and will always be, our number one priority.”
The decision comes after several famous influencers were exposed for promoting cryptocurrency pump and dump scams to their fans. Most notably, Tana Mongeau, Daniel “KEEMSTAR” Keem, and Jake Paul have all been involved in the space.
How does pump and dump work?
Traditionally, pump and dump scams occur when a small group of investors decide to purchase stock in a company with low market value AKA at a low share price. They enlist other investors to buy-in under the guise that the company’s value is increasing. As more people buy-in, this ‘pumps’ the stock price up. The initial investors then sell their stock at a much higher price than they purchased it for, making money on an artificial capitalisation they essentially created. Selling bulk stock that was purchased at a low price drives the current price down— hence the ‘dump’— and other investors suffer significant losses.
While this practice is illegal on equity markets, the cryptocurrency market remains relatively unregulated and thus these scams have become increasingly prevalent.
As Alex Lielacher for bravenewcoin.com notes, influencer marketing is a powerful medium to facilitate pump and dump schemes in the cryptocurrency space, as “the price pumps are conducted by spreading hype and fake information about a coin on social media.”
“You’re simply reliant on someone further down the line being willing to pay more than you did to turn a profit, which is a risky bet indeed,” financial analyst Laith Khalaf also said of SafeMoon— the coin promoted by Jake Paul and KEEMSTAR— adding that it “doesn’t sound too different from a pyramid selling scheme”.
Kay addressed the controversy in a Twitter thread posted earlier this week after receiving backlash from fans who allegedly lost money from investing in ‘Save the Kids’.
“I want you all to know that I had no ill intent promoting any crypto alt coins. I honestly & naively thought we all had a chance to win which just isn’t the case. I didn’t vet any of this with my team at FaZe and I now know I should have,” he wrote.
He went on to say it was “so irresponsible” of him to tell his fans about crypto coins without “knowing more and knowing that they can do more harm than good.”
“I’m really struggling with the fact that I let you all down,” he finished. “And more importantly anyone whose trust I’ve lost.”
For more on influencers and cryptocurrency scams, read here.