WASHINGTON: Federal prosecutors and regulators are investigating whether market manipulation or other types of misconduct fueled last month’s rapid rise in stock prices like GameStop Corp. and AMC Entertainment Holdings Inc., according to people familiar with the matter.
The fraud section of the U.S. Department of Justice and the U.S. Attorney’s Office in San Francisco have requested information about the activity from brokers and social media companies that were the center of the commercial frenzy. Prosecutors have cited information from brokers such as Robinhood Markets Inc., the popular online brokerage that many investors used to trade GameStop and other stocks, people said.
GameStop shares rose about $ 20 to $ 483 over a two-week period in January. Since then, shares have fallen to about $ 50. It was fueled by an army of bullish traders urging each other on Reddit to buy shares and squeeze hedge funds who were betting the price would go down. Traders who bet that declining stock prices are known as short sellers.
In addition to the Justice Department investigation, the Commodity Futures Trading Commission is examining similar transactions, according to people. The CFTC has opened a preliminary investigation into whether misconduct occurred, as some Reddit traders targeted silver futures and the largest silver-linked stock exchange, the iShares Silver Trust, said a of people.
The Wall Street Journal has reported that the Securities and Exchange Commission is also reviewing the trade frenzy. The SEC and the CFTC are civilian regulators. The burden of proof in a regulatory compliance action is less than in a criminal case.