UPDATED 1:02 PM PT – Friday, February 12, 2021
Federal prosecutors are investigating whether market manipulation or other kinds of questionable activity played a role in GameStop’s stock surge this past January.
The surge happened when Reddit users on the WallStreetBets forum noticed 140 percent of GameStop’s stocks were shorts.
In light of this realization, people with Robinhood, E-Trade and Fidelity accounts bought large quantities of GameStop stock, bringing the price from roughly $20 a share, to a high of $483 a share.
The House Financial Services Committee will be conducting a similar investigation into the GameStop trading frenzy. They will also be looking into possible market manipulation by Robinhood, who halted the purchasing of GameStop and other retail securities at the height of the surge. This was a move many believe was at the direction of hedge funds like Citadel LLC, who held massive short positions in the stock. Even so, Joe Biden’s Department of Justice has decided the working class day traders are the ones who need to be investigated, alleging they orchestrated an illegal pump and dump.
However, founder and CEO of PredIQt and WallStreetBets member William Legate said this was not a pump and dump, but rather part of a larger socioeconomic movement.
What we're witnessing isn't a traditional pump & dump… it is an unorganized, yet collective effort of memelords & avg Americans to completely ignore all market fundamentals &, thru the power of social media, bankrupt hedge funds overnight, taking their funds. Legality unclear.
— William LeGate (ig: @legate) (@williamlegate) January 26, 2021
“A lot of these traders on WallStreetBets quite frankly don’t care whether or not they make or lose money,” Legate said. “The diamond hands over there are wanting to hold long term and they have a lot of animosity towards the Wall Street types that they feel are like, rigging the system against them.”
The DOJ’s first order of business has been to subpoena information from online brokerage firms like Robinhood, possibly to see who the first major investors were in GameStop at the onset of the short squeeze.
What is now becoming clear is that the government seems more interested in investigating the average day traders who saved companies like GameStop from being killed by the Wall Street hedge funds.
Now, working class people are more disturbed by the fact that massive hedge funds can simply buy up short positions to kill a company, and in the case of GameStop, force tens of thousands of employees into unemployment. This kind of market manipulation has real life effects on not only the economy, but working class Americans.
Any investigation into Robinhood’s possible market manipulation is going to be conducted by the chairwoman and ranking member of the House Financial Services Committee, Rep. Maxine Waters (D-Calif.) and Rep. Patrick McHenry (R-N.C.).
“I am not starting this hearing taking sides or believing that Robinhood is guilty of anything,” Waters stated. “In fact, this hearing is going to be educational.”
Interestingly enough, Robinhood CEO Vlad Tenev, who is set to testify in front of Waters and McHenry on the matter, only donated to two politicians in the 2020 election, Waters and McHenry.