\textsc{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 \ac{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 \textsc{Perseus}, which collects real-time data from the \acs{osn} and cryptocurrency markets. \textsc{Perseus} then constructs temporal attributed graphs that preserve the direction of information diffusion and the structure of the community while leveraging \ac{gnn} to identify the masterminds behind pump-and-dump activities. Our design of \textsc{Perseus} leads to higher F1 scores and precision than the \ac{sota} fraud detection method, achieving fast training and inferring speeds. Deployed in the real world from February 16 to October 9 2024, \textsc{Perseus} successfully detects $438$ masterminds who are efficient in the pump-and-dump information diffusion networks. \textsc{Perseus} provides regulators with an explanation of the risks of masterminds and oversight capabilities to mitigate the pump-and-dump schemes of cryptocurrency.