Wayne Kacheche believed in Dogecoin because Elon Musk did. The Tesla founder and billionaire kept talking up the popular meme token on Twitter, and in May 2021 even joked about Dogecoin during a Saturday Night Live segment. Shortly after the episode aired, Dogecoin plunged 40%.
Kacheche, then a 19-year-old university student living in South Africa, decided to check out Dogecoin. He started watching YouTube videos and came to share a widespread sentiment in the crypto world that Dogecoin had peaked. He began to search for altcoins, going down an algorithmic rabbit hole that brought him to a crypto influencer named Crypto Pablo. After two months of investing, Kacheche believed the channel mostly pushed scams.
“I was still a newborn to the crypto space,” Kacheche said. “I stopped following his shilling and also unsubscribed from his channel.”
A week or two later, the YouTube algorithm spat out Lark Davis—the “Crypto Lark.”
Today, Davis is a prominent crypto influencer with about 1 million followers on both Twitter and Instagram, and nearly 500,000 on YouTube. Davis has a cherubic countenance and earnest demeanor, speaking directly to his viewers in the videos he posts often multiple times a day with titles like “This Coin Made Millionaires.” He comes across as a baby-faced Jim Cramer, if the CNBC host was the nextdoor neighbor’s grandson shilling shitcoins—crypto slang for tokens of dubious value—instead of stocks.
In late September, the pseudonymous Twitter sleuth ZachXBT posted a long tweet thread laying out evidence that Davis had promoted new altcoins to his massive audience while at the same time receiving early access to the tokens as a pre-sale investor, and then selling them right around the time he was promoting them to his followers. Davis’ acolytes were left holding the proverbial bag when the coins invariably crashed.
Fortune independently verified the findings by examining the blockchain. Elliptic and Chainalysis, two blockchain analysis firms that work with top crypto companies and government agencies, likewise confirmed ZachXBT’s analysis.
“The assessment appears correct and aligns with what was revealed on the Twitter investigation,” researchers at Elliptic told Fortune.
After a request for comment from Fortune, Davis initially pointed to a Tweet thread he posted in response to ZachXBT, telling Fortune, “I don’t have anything else to add about these BS allegations.”
After subsequent e-mails from Fortune, Davis said that the analysis was correct, although it “only tells part of the story.” He admitted to being an early investor in many of the projects, and that it was “entirely possible” he did not always disclose so to his followers, contrary to what he claimed in his Tweet thread.
“Investors need to secure profits when they have them,” he told Fortune, “Which is what I do and did.”
Anatomy of a YouTube hustle
The crypto downturn has reduced the prevalence of influencer schemes, but the recent antics of Lark Davis reveal how dodgy promotions remain very much entrenched in the world of cryptocurrency.
“A lot of people just always think that other people have their best intentions in mind when that’s not the case,” ZachXBT told Fortune. “This space is very cutthroat.”
When Kacheche discovered Davis, the YouTube promoter had only about 200,000 subscribers, but that figure was impressive enough to lead Kacheche to believe he must be on the up-and-up.
“I was captivated by the energy he exudes in his videos, which made him seem very charismatic, knowledgeable, and trustworthy,” Kacheche said.
Davis frames his videos as if he is giving sober analysis of new trends in the crypto landscape. In one from March 2021, he dedicated a segment to NFTs. “A lot of people are still stuck on, ‘I can’t believe a JPEG can sell for $1 million,’” Davis said. “I know, I know, the NFT mania is getting a bit crazy, but that’s the early phase of learning about this technology.”
After explaining how trusted businesspeople like Mark Cuban plan to use NFTs for real-world use cases like selling sports tickets, Davis begins to list different projects that he plans to invest in. “You know me, I’m the pick-and-shovel guy,” he said. “More than chasing the single NFTs, I want to chase the projects that are building the NFT infrastructure.” As the space exploded, it was a sensible proposition—except for what was happening in the background.
In a video, Davis highlights a cartoon NFT project called Polkamon as “a very interesting play.” He compares it to CryptoPunks, whose pixelated avatars have sold for millions of dollars. “Getting in now is getting in on the ground floor,” Davis said. The sale of the token was happening the next day, March 31.
Kacheche was captivated by the Polkamon project. He saw another popular YouTuber posting about it as well and decided to invest. He said he was going through a rough patch financially and thought the crypto investments would make him a millionaire.
The NFT project promoted by Davis, called $PMON, is one highlighted by ZachXBT and confirmed by Fortune.
On March 31, the day of the launch, Lark Davis’s wallet received a deposit of 10,000 tokens—which can be seen on the blockchain explorer Etherscan—via a “private distribution” contract, rather than buying them on the open market through a decentralized exchange like Uniswap.
Over the next few hours, he swapped all of the $PMON tokens on Uniswap for over $310,000 worth of the U.S. dollar-pegged stablecoin USDC and a token known as wrapped Ether, exiting his position. After hitting a high of almost $60, the $PMON token dropped to under $30 by mid-April and under $5 by mid-June. Today, it is hovering around $1.20.
Screenshot from Etherscan
Kacheche was not as savvy.
“I kept pumping in my allowances regularly for about four months as the price of the coin kept going down,” he said.
Meanwhile, Kacheche’s personal life began to spiral—he started failing classes and ultimately was kicked out of school.
“These scam-Tubers target noobs who are very high on the hopium and are hoping to make a quick buck,” he said. “I lost a lot of money thinking they were legit and looking out for the smaller fish.”
The $PMON token is just one of eight cryptocurrencies that have received the pump-and-dump treatment from Davis.
As ZachXBT told Fortune, he was easily able to identify Davis’s personal wallet by finding a donation address listed in an old YouTube video from November 2017, as well as by tracing the purchase of an NFT that Davis tweeted he owned.
“Most people are smart enough to have multiple wallets,” ZachXBT said, “but he literally has used the same wallet since 2017.”
There is a clear pattern of behavior in Davis’s actions, which ZachXBT estimated at earning the influencer some $1.2 million—a figure that can be calculated through Etherscan, as Davis generally would swap the tokens into USDC using Uniswap.
Davis chooses tokens with a specific “tokenomics”—the word the crypto world uses to describe the distribution and economic incentives associated with any particular token.
Many of the projects he promotes are designed in a way that a large percentage of the initial tokens are distributed to insiders and just a small percentage to the public. Insiders can dump the tokens at launch—there is no vesting period, like with some sales—affording them much higher prices than everyday investors see later. “It puts retail already at a disadvantage,” ZachXBT said.
Popular influencers often receive access to tokens or cash to promote projects, said Molly White, a software engineer and crypto critic. A recent example is Kim Kardashian, who was paid $250,000 to post about a crypto called ethereumMax, a project with similarly questionable tokenomics that hurt normal investors. Anyone who bought the token after Kardashian promoted it would have lost 95% of their money. The U.S. Security and Exchange Commission fined Kardashian $1.26 million in early October for failing to disclose the payment.
Another example is the ill-fated Let’s Go Brandon token, which was pushed by far-right agitators like then-Representative Madison Cawthorn, who owned—and subsequently sold—a sizable chunk of the cryptocurrency. The trades triggered an investigation in May from the U.S. House Ethics Committee, although it never publicly disclosed its findings.
Cawthorn’s team did not respond to a request for comment from Fortune.
“If the person has sufficient reach, that can really pump the price of the token,” said White. “The only way that people actually make money off of a pump-and-dump scheme is getting enough suckers to buy into it.”
During crypto’s latest bull run, many followers may have understood the Ponzi nature of some projects, but nonetheless hoped they could get in early and sell their tokens before the inevitable crash. In March 2021, as crypto prices soared and Davis’s videos reached millions, a Twitter user with the handle Dr Rookiemamba shared strategies with other hopefuls. “DYOR [do your own research] and watch Lark Davis on YouTube,” he told another user when trading tips on different tokens.
Meanwhile, Dr Rookiemamba, a Nigerian doctor then doing his masters in the U.K. who asked to be identified by his Twitter handle, told Fortune that he ended up investing around $6,000 in one altcoin based on the advice of crypto social media influencers. He only sold when it bottomed out at $1,000.
“They tell you when to buy, but they never tell you when to sell,” he said.
In his initial Twitter response to ZachXBT, Davis suggested he’s on the same footing as his followers, writing that “I always disclose on [YouTube] when I am invested in a token sale,” and that “I also shared these opportunities with my followers and subscribers well before the launch.”
As Fortune’s analysis shows, Davis received early token access as an investor in many of the projects. While he promoted the tokens to his followers, he dumped them on Uniswap at or near the top of their value.
“There is evidence of the protocols sending Lark some coins directly,” researchers at Elliptic said.
Researchers at Chainalysis agreed, telling Fortune, “Most of these cases indicate that he is not a standard buyer of the tokens.”
An example is the $SHOPX project. Etherscan shows that Davis received 120,000 tokens via the Disperse app, a tool used to distribute tokens, rather than buying them on the open market on the launch day in March 2021. He then tweeted about the project while selling all of his holdings on Uniswap. The token price fell almost 70% within a month, and over 99% to date.
When presented with evidence, Davis said he was a pre-sale investor in several of the cases. “That is how it works,” he wrote to Fortune. “I take the risk of backing an early-stage project by investing my own money.”
Contrary to Davis’s initial claims, Fortune could not find evidence that he always disclosed investments to his followers. When pressed, Davis admitted that he may not have.
“One thing I can agree on with all of this is that I can definitely do a better job on disclosures and be more consistent with that,” he said. “It won’t fix the past but hopefully will provide better transparency moving forward.”
Lark Davis is just the tip of the iceberg. ZachXBT points to other influencers with similarly predatory behavior, including MoonCarl, who has 1.2 million followers on Twitter and has been accused by Twitter users of faking lavish trading behavior by using a “demo” account. Another is CryptoBanter, with over 250,000 followers on Twitter, who was the subject of a different ZachXBT investigation on token pump-and-dump schemes.
MoonCarl and CryptoBanter did not respond to requests for comment from Fortune, nor did Twitter. After asking for examples of Davis’s videos, a YouTube representative said they had nothing to share.
No meaningful action
Academics say social media platforms don’t police predatory financial behavior for a simple reason: It’s lucrative.
“The fundamental reason is profit,” said Dr. Timothy Graham, an associate professor at the Queensland University of Technology who studies digital media. “For both YouTube and Twitter, the business model boils down to ad revenue, and more concretely in Twitter’s case what are known as mDAUs, or monetizable daily active users.”
The dynamic is exacerbated by the fact that crypto is largely unregulated. “There’s no legal disincentive to allow crypto scams to take place at scale on the platform,” Graham told Fortune.
He pointed to the platform’s financial scam policy, which does not mention crypto.
“If you read the details of this policy, what Twitter views as a violation is a narrow, consumerist construction of financial scam and abuse,” he said.
Dr. Lana Swartz, an associate professor of media studies at the University of Virginia, agreed with the assessment. Social media platforms “have erred on the side of being hands off when it comes to comes to moderation, particularly when it doesn’t carry a direct legal or reputational liability,” she told Fortune.
As a result, Graham said that moderation of harmful financial activity is unlikely to come from companies like Twitter and YouTube.
“Platforms are always lagging behind civil society when it comes to preventing and stopping harmful and/or illegal activity,” he said. “They will delay taking meaningful action as long as they can, as a rule.”
Given the recent SEC fine against Kim Kardashian for similar behavior, there is the question of why regulatory agencies have not acted.
“I wasn’t super surprised that they went after Kim Kardashian—it was more of a publicity thing than anything,” the crypto critic Molly White said. “If the SEC cracks down on Lark, you’re not going to be reading a Washington Post article about it.”
The SEC did not respond to a request for comment.
Social media-driven pump-and-dump schemes have receded during Crypto Winter, as overall retail investment declines and headlines about people becoming millionaires from obscure shitcoins are few and far between.
Regardless, influencers like Davis are still active. In a recent video, he detailed how an NFT investor turned $88 into $5 million by minting CryptoPunks in 2017 and holding them until 2021.
“NFTs are cool, NFTs make money, and NFTs are only going to get bigger,” Davis said.
Kacheche, for his part, stopped investing in altcoins, but he hasn’t left crypto altogether. He sticks with the top 100 projects, still doing his own research as he prepares to reapply to college.
“There are too many innocent people drawn in by these scammers hoping for a better tomorrow,” he told Fortune.