(Bloomberg) —
Walmart Inc. and a press-release distributor rushed to investigate a hoax tying the retailer to a supposed cryptocurrency deal after a false announcement sent a short-lived surge through a highly unregulated market.
According to the inauthentic press release on GlobeNewswire at 9:30 a.m. in New York, Walmart was about to start letting its customers pay with Litecoin, which is the 16th largest cryptocurrency by market capitalization according to the website CoinMarketCap.com. While the statement wasn’t true, Walmart has expressed interest in cryptocurrencies and advertised a job opening earlier this year to develop a blockchain strategy. Within an hour, the retailer denied the statement, erasing most of a 33% surge in Litecoin and sending a shudder through the broader cryptocurrency market. A verified Twitter account for Litecoin news deleted a tweet linking to the press release after it became clear that the announcement was fake, said Charlie Lee, creator of Litecoin and managing director of the Litecoin Foundation.
“What happened was someone obviously created this fake news and got it on the GlobalNewswire,” Lee said by phone. “It’s an unfortunate situation — we obviously shouldn’t have tweeted the news.”
The debacle underscores the danger of hoaxes in one of the hottest corners of the financial markets. While fake stories that move prices are as old as buying and selling, cryptocurrencies would seem to provide fertile ground for deception. Unlike stocks, trading is mostly untraceable, so scammers leave few tracks. And traders have become conditioned to expect outsize price reactions to the flimsiest news — when, say, Elon Musk namechecks a project on Twitter.
Lee said the episode showed how fast unverified information can exert an effect on markets. “We realize how powerful a single tweet can be in this day and age,” he said. “It was over-excitedness about the news. It happens.”
Walmart said it has “no relationship” with Litecoin in a statement after a representative told Bloomberg News that the company is trying to learn more about the erroneous news release. The Litecoin Foundation said in a tweet that it hadn’t entered a partnership with Walmart.
Litecoin erased its gain, falling less than 1% at 1:30 p.m. in New York. Walmart shares slipped less than 1% to $145.02 after earlier trading in positive territory.
A spokesperson for Intrado, which operates GlobeNewswire and is controlled by Apollo Global Management, said the company would remove the release from its website, which it did around 11:15 a.m. The wire service is investigating the incident. Intrado distributes 200,000 press releases per year, according to its website.
Walmart advertised a position earlier this year to develop “the digital currency strategy and product roadmap” while identifying “crypto-related investment and partnerships,” according to an August job posting on the company’s website.
Cryptocurrencies aren’t the only markets in which bad information has moved prices, of course. The SEC has gone after individuals for issuing phony press releases in recent years. The agency often relies on well-timed stock trades for clues as to who is behind the hoax, but it could be harder for it to unravel this hoax, since cryptocurrency is designed to be anonymous. The SEC, which didn’t immediately respond to a request for comment, has limited access to data on well-timed crypto trades and will likely have to turn to unregulated platforms for more information.
It’s unclear whether the episode will dissuade big companies from partnering with cryptocurrencies going forward. Their use has skyrocketed in recent years, with El Salvador even going as far as adopting Bitcoin as legal tender, but questions about their susceptibility to meddling and pump-and-dump schemes has fueled skepticism in many corners of the market.
“In terms of this being harmful for crypto — this happens with the regular stock market also,” Litecoin’s Lee said. “It happens a lot more with the regular stock market than with crypto. But I’ve seen it happen a few times with crypto.”
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