“A lie can travel halfway around the world while the truth is putting its boots on.” – Actually Not Mark Twain
This morning, an unknown scammer perpetrated a news hoax that likely made them a lot of money and cost innocent investors just as much.
A press release posted to the GlobeNewswire service this morning by “Walmart, Inc.” claimed that the big-box retailer would begin accepting payments in the cryptocurrency litecoin (LTC). The news was quickly picked up by reputable news outlets including Reuters, U.S. News & World Report and CoinDesk.
Litecoin, unsurprisingly, surged in the markets, zooming up from $175 to a peak of $233.44 in roughly 15 minutes, according to CoinDesk data. Litecoin trading volumes also surged. Much remains to be unpacked about trading flows during that period, but the likely bottom line is that a lot of people bought LTC on the news.
Then LTC tanked all the way back down to below $180 within another 45 minutes, as some observers began to notice discrepancies in the release. Walmart has now confirmed that it was fake.
Whoever created the fake release likely dumped a large bag of LTC as fast-fingered traders bought the hype. That means a lot of investors just lost a lot of money to a pump-and-dump.
CoinDesk is still working to figure out exactly what happened, but there were at least two key failures. One was at GlobeNewswire, which published a release from a user impersonating WalMart; and one was at the Litecoin Foundation, which retweeted the news on Twitter, seeming to confirm it – despite it containing what we now know were fake quotes from Litecoin Foundation leadership.
Of course, CoinDesk and other news outlets also failed in our due diligence. This was a breakdown in our internal processes, and we are adding further safeguards against getting taken in again.
From the outside, the failure at GlobeNewswire appears to have been the most severe. The service is widely considered a reputable platform for real companies to publish real press releases. The Associated Press, perhaps the most trusted news service in the world, in turn trusts GlobeNewswire enough that it distributes some of its releases automatically.
In this case, though, GlobeNewswire appears to have been duped by a stunningly simple trick. Whoever published the fake release registered a “Walmart, Inc.” account associated with the domain “Walmart-corp.com.”
That sure sounds legit, but the domain is actually owned by a squatter. This was also the first release posted to the account, which should have merited some scrutiny. The release included an email address, email@example.com, supposedly for real-life Walmart public relations chief William White. But an email sent to that address just before noon Eastern time Monday bounced immediately.
“When GlobeNewswire became aware this morning that a fraudulent user account was used to issue an illegitimate press release we promptly withdrew the press release and issued a Notice to Disregard,” the company said in a statement to CoinDesk. “This has never happened before and we have already put in place enhanced authentication steps to prevent this isolated incident from occurring in the future. We will work with the appropriate authorities to request – and facilitate – a full investigation, including into any criminal activity associated with this matter.”
The pumper is likely to face legal fallout. Even if Walmart stock was not the target, the involvement of a publicly traded company means the SEC is likely to launch an investigation, according to lawyers who spoke to the New York Times. The regulator has repeatedly prosecuted people who try to use fake news to manipulate financial markets.
Another significant failure seems to have been by the Litecoin Foundation, which retweeted the news release early Monday morning from the @Litecoin account. That was reasonably seen by some as confirmation, since Foundation leadership was quoted in the release and would presumably have been involved with preliminary talks with Walmart.
But according to Foundation head and Litecoin creator Charlie Lee, the retweet was a process error.
“We have three people who have access to the [Litecoin] Twitter account,” Lee told CoinDesk. The person on duty “saw the news on GlobeNewswire and got excited. He didn’t know better that we didn’t have a partnership, and unfortunately, he didn’t check with me because I was asleep at the time. So he retweeted it, and 10 minutes later he saw that it was fake and we deleted it.”
“It’s unfortunate,” Lee said. “We’ll definitely be more careful in the future … But I think the story blew up before we tweeted it.”
“It happens. Everyone [in crypto] just reinforces each other,” he said.
That reinforcement will be hard to completely unwind – at this writing, many tweets trumpeting the fake Walmart/litecoin news are still up, and could mislead investors for weeks or even months to come.
This whole mess reflects broader pitfalls of the internet age. False news is more viral than the truth, largely because, freed from the chains of reality, it is usually splashier and more surprising. It also takes much more work to debunk false information that has gained a foothold than it does to create it in the first place.
At the same time, the business imperatives of online media, particularly the financial press, make the entire system more vulnerable to disinformation. Getting a story out quickly can make a huge difference to the traffic and advertising revenue it generates, and over time, to the Google visibility of an entire website. That can lead to corner-cutting as newsrooms race to be first. This time, CoinDesk succumbed to that pressure.
Update 4:55 ET 9/13/21: Added statement from GlobeNewswire.