As the dust begins to settle around GameStop stock meme phenomenon, investigations into hedge funds, trading platforms and the Reddit community that have fueled it are just beginning. A lot of people have already lost a lot of money, but there would be even more things if lawmakers and regulatory agencies find out that real laws were broken.
Yesterday, the Wall Street Journal reported that the Department of Justice’s fraud section and the San Francisco attorney’s office in the United States were looking for information “from brokers and social media companies that were at the center of the commercial frenzy.” In theory, any case arising from such investigations would be criminal, which would be more difficult for regulators to prove, but it would also impose a heavier burden for any possible wrongdoing.
But like the Wall Street Journal reports, the Commodity Futures Trading Commission and the Securities and Exchange Commission they are also studying what happened to GameStop. As civil regulators, they could end up fining some of the traders or companies involved. Massachusetts securities regulators are also reportedly involved, with the Commonwealth Secretary’s Office citing Reddit trader DeepFuckingValue, also known as former insurance marketer Keith Gill, to testify at a state hearing later this month.
All this cobut as Congress prepares to hold its own hearings on how people like Gill and others in the WallStreetBets subreddit managed to take advantage of the big bets made by hedge funds and commission-free trading apps like Robinhood to take stock from GameStop from January double digits to more than $ 400 per share during the meme bubble rise. Maxine Waters, Chair of the House Financial Services Committee, Gill previously requested will also attend the Chamber hearing at GameStop scheduled to take place on February 18th.
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Yesterday, The New York Times reported that Reddit executive Steve Huffman would also testify at the hearing. It is also expected to be attended by a representative of Citadel, one of the hedge funds of the center of the negotiation, in addition to a possible appearance of its founder and CEO, billionaire Kenneth C. Griffin. In addition to Citadel Melvin Capital, a hedge fund that bet on GameStop and other companies (and lost billions in the process), Citadel’s sister company Citadel Securities, which it also founded, is one of the market leaders responsible for executing some of the actions that people do on platforms like Robinhood. Waters also previously suggested calling a representative of Melvin and Robinhood co-founder and CEO Vlad Tenev to attend the hearing as well.
Robinhood was attacked by angry users and several members of Congress after her stopped trading GameStop and other meme actions on its platform, which he later said he had because he didn’t have enough money to cover the transactions users made on extremely volatile stocks. The reduction in trading was followed by a series of severe declines in the value of the inflated price of GameStop shares and was finally followed by its relative collapse (currently hovering around $ 50, which is very higher than a year ago and much lower than its peak last month).
Due to Citadel’s connection to Robinhood and a hedge fund that provides GameStop action and Robinhood’s stoppage in GameStop trading, there are many questions about the timing of events and who won and lost to because of them. The weakness of GameStock’s actions also raised bigger questions about the absurd, but seemingly completely legal, ways people can try to make money on Wall Street. through wild betting and then form a subculture around it on Reddit. We’ll see if Congress or anyone else manages to get to the bottom of what was going on, let alone fix it.