The U.S. Securities and Exchange Commission has deployed agents to investigate social media posts about GameStop and other companies that hit the news for wild stock rallies over the past few weeks, searching for evidence that fraud was committed, according to a new report.
What are the details?
According to Bloomberg, sources say “the scrutiny is being done in tandem with a review of trading data to asses whether such posts were part of a manipulative effort to drive up share prices,” and “the regulator is specifically on the hunt for misinformation meant to improperly tilt the market.”
The outlet reported:
The prevailing narrative is that Wall Street short-sellers were caught flatfooted over the past two weeks as retail traders banded together via Reddit message boards and bought up stocks that hedge funds were betting against. But some market participants, including famed short-seller Carson Block, have started to speculate that the short squeezes that drove GameStop, AMC and other stocks to exorbitant heights might have also involved professional investors who either took advantage of the Reddit-fueled frenzy or helped hype it.
Indeed, one influential Reddit user has already caught the eye of regulators. Keith Gill, 34, known as “Roaring Kitty” on some social media accounts and operates under the username “u/DeepFu*kingValue” on Reddit, is currently being probed by officials in the commonwealth of Massachusetts, according to The New York Times.
Gill is a registered securities broker who has hyped GameStop on various social media platforms through posts and videos. He recently left his former employer, Massachusetts Mutual Life Insurance Company, giving the company notice on Jan. 21.
The Times noted:
Mr. Gill had not posted on his YouTube channel since Jan. 22, but he still posts on the Reddit WallStreetBets forum. On Wednesday, his account posted an image that put the value of his GameStop holdings at more than $8.6 million. The image also showed cash holdings of nearly $14 million.
Now, House Financial Services Committee Chair Maxine Waters (D-Calif.) wants to speak to Gill, too, at a hearing on the GameStop matter slated for Feb. 18.
Waters told Cheddar of Gill on Wednesday that he is on her “list to be present,” adding, “I want him. I want him here. I want him here, I want absolutely to have RobinHood here, I even want to have GameStop here.”
BREAKING — @RepMaxineWaters tells me/@HenaDoba that she is calling on Keith Gill (aka u/DeepFu*kingValue on @reddit) and @GameStop representatives to also appear at the 2/18 Financial Services hearing
— j.d. durkin (@jiveDurkey) February 3, 2021
What’s the background?
Users on Reddit carried out an uprising of sorts against hedge funds last month, launching an online campaign to buy up shares of GameStop (and other struggling firms such as AMC Entertainment Holdings, Inc.) in an effort that sent the stocks soaring and “squeezed” short sellers — costing big fish billions of dollars.
The situation sparked debate over financial regulations and whether the Reddit rebellion should be considered market manipulation. Meanwhile, popular stock market app RobinHood — which branded itself as an accessible tool for the retail investor—fueled outrage by restricting users from purchasing GameStop and other stocks as the prices continued upward.
Government investigators now want to get to the bottom of what happened, to find out what crimes — if any — were committed in the volatile affair that took Wall Street by storm.