FaZe Banks ran a pump-and-dump scheme on his own esports organization's cryptocurrency token

FaZe Banks (Ricky Banks), a co-owner of FaZe Clan, promoted a cryptocurrency token called $FAZETOKEN to his millions of followers on social media without disclosing that he and other insiders were selling their holdings at the same time. The token launched in January 2022, and Banks publicly hyped it as a legitimate investment opportunity. Within weeks, the price collapsed after insiders dumped their coins, leaving retail investors who bought at the peak with massive losses.

The scheme is a textbook pump-and-dump: use influence to drive up demand and price, then sell your own stake before the market crashes. Banks and other FaZe insiders made money on the way up while ordinary investors lost money on the way down. The U.S. Securities and Exchange Commission (SEC) later charged Banks and two other FaZe executives with securities fraud over the token promotion.

Key Takeaways

  • FaZe Banks promoted $FAZETOKEN to his social media followers without telling them he was selling his own coins at the same time.
  • The token price rose sharply after his promotion, then collapsed within weeks once insiders stopped buying and started selling.
  • The SEC charged Banks, FaZe CEO Lee Trink, and FaZe CFO Jack Dunlap with securities fraud in connection with the scheme.
  • Investors who bought the token at peak prices lost significant money, while insiders profited from the price movement they created.
  • The case illustrates how social media influence can be weaponized to manipulate financial markets, especially in unregulated crypto assets.

How the $FAZETOKEN scheme worked

FaZe Banks and other insiders created $FAZETOKEN in January 2022 as a way to raise money and build community around the FaZe Clan esports brand. Banks, who had millions of followers across YouTube, Twitter, and other platforms, began posting about the token and encouraging his audience to buy it. He framed it as a legitimate investment in the FaZe brand and community.

The promotion worked. Retail investors, many of them young fans of FaZe content, bought the token in large numbers. The price climbed rapidly in the weeks after launch. But while Banks was publicly promoting the token to his followers, he and other insiders were privately selling their holdings. They had bought tokens at the lowest prices before launch, and they sold them at much higher prices after the hype drove demand up.

Once insiders finished selling, the buying pressure disappeared. The token price collapsed. Investors who had bought near the peak lost 90% or more of their money. Banks and the other insiders walked away with millions in profit from coins they had purchased for pennies.

The SEC charges and what they alleged

In June 2023, the SEC filed charges against Banks, FaZe CEO Lee Trink, and FaZe CFO Jack Dunlap for securities fraud. The agency alleged that the three men violated federal securities laws by promoting the token without disclosing their financial interest in its success and without telling investors they were selling their own coins.

The SEC's core argument was that Banks and the others had a duty to disclose material facts — facts that would matter to a reasonable investor's decision to buy. The fact that the person promoting the token was simultaneously dumping his own holdings is exactly the kind of material fact that changes whether an investment looks good or bad. By hiding this information, the defendants allegedly defrauded investors.

The charges carry potential civil penalties and disgorgement of profits. Banks and the others have the right to defend themselves in court, and the case has not yet reached a final resolution as of early 2024.

Why this matters for cryptocurrency and social media influence

The FaZe Banks case is significant because it shows how social media influence can be used to manipulate financial markets. Cryptocurrency markets are largely unregulated compared to traditional stock markets, and tokens can be created and promoted with minimal oversight. When someone with millions of followers promotes an asset, that influence can drive real money into the market — and real losses when the scheme unwinds.

The case also highlights a gap between how influencers operate and how securities law works. Many influencers promote products and services to their followers every day. In most cases, this is legal — they disclose sponsorships or partnerships. But when the product is a financial asset and the influencer has undisclosed financial stakes in its price movement, the rules change. The law treats this as fraud because the influencer is using their credibility to manipulate the market for personal gain.

For investors, the lesson is straightforward: anyone promoting a cryptocurrency token or other financial asset has an incentive to do so if they own a large stake. If that person does not explicitly disclose their holdings and their plan to sell, assume they are hiding something.

What happened to the money investors lost

Most of the money that retail investors lost in the $FAZETOKEN collapse is gone. Cryptocurrency transactions are irreversible, and once the price collapsed, there was no mechanism to recover the value. Some investors may be able to recover money through a civil lawsuit or settlement, but this process is slow and uncertain.

If the SEC's case results in a judgment against Banks and the others, the court may order them to pay restitution to harmed investors. However, even if the SEC wins, collecting that money depends on whether the defendants have assets to seize. In many fraud cases, by the time a judgment is entered, the defendant has already spent or hidden the proceeds.

How to spot similar schemes

Pump-and-dump schemes in cryptocurrency follow a predictable pattern. An influencer or group of insiders creates a new token or promotes an existing one. They use social media, YouTube, or other platforms to hype the asset and drive up demand. The promotion emphasizes how early investors can get rich, how the project is revolutionary, or how the influencer personally believes in it. Notably, the promoter does not disclose that they own a large stake or that they plan to sell.

Red flags include: the promoter has a financial stake they do not disclose, the token has no real use case or technology behind it, the promotion relies on urgency or fear of missing out, the price rises sharply on hype alone, and the promoter suddenly stops talking about the token after the price peaks. If you see these patterns, the asset is likely a pump-and-dump, and retail investors are the ones who lose money.

Frequently Asked Questions

Did FaZe Banks go to jail?

As of early 2024, Banks has not been convicted or jailed. The SEC filed civil charges, not criminal charges. A civil case can result in fines and disgorgement of profits, but not prison time. If the case goes to trial and Banks loses, he would face financial penalties. A separate criminal investigation is possible, but none has been publicly announced.

How much money did investors lose on $FAZETOKEN?

The exact total is unclear, but estimates suggest tens of millions of dollars in losses across all retail investors who bought the token. The token price fell from a peak of around $0.087 to less than $0.001, meaning investors who bought near the top lost over 99% of their money. The total amount raised before the collapse was in the millions.

Can investors get their money back?

Possibly, but not automatically. If the SEC wins its case and obtains a judgment, the court may order Banks and others to pay restitution. However, collecting that money is uncertain and can take years. Investors could also pursue a private lawsuit, but this requires hiring an attorney and proving damages. Most retail investors in crypto schemes recover little to nothing.

Is promoting cryptocurrency tokens illegal?

Promoting a token is not illegal by itself. What is illegal is promoting a financial asset without disclosing your financial interest in its price movement. If an influencer owns a large stake in a token and promotes it without telling followers, that is securities fraud. If the influencer discloses their stake and their plan to sell, promotion is generally legal.

What did FaZe Clan do about this?

FaZe Clan as an organization faced reputational damage from the scandal. The company distanced itself from the token scheme and removed related content from its platforms. However, the organization itself was not charged with fraud — only the individual executives (Banks, Trink, and Dunlap) were named in the SEC case.