Want to Make $1 Million? Market Manipulation Is Back! (Thanks to Social Media)
Thomas Yeung, 16 July 2021
When Keith “Roaring Kitty” Gill announced he was buying GameStop (NYSE:GME) shares and options on Reddit’s r/WallStreetBets, regulators might have considered his outrageous claims as parody — speech protected by First Amendment rights. Who could take $20 calls on GME seriously when the stock was trading at $5?
Since then, other social media forums have blurred the lines between satire and intentional deception. This week, shares in SCWorks (NASDAQ:WORX) doubled after traders on Discord and Twitter banded together to push prices higher. MINM, DTSS and an alphabet soup of other small-cap stocks have followed the same path
In other words, the Securities and Exchange Commission (SEC) has a problem on its hands: when does “swarm trading” turn into market manipulation?
PULLING THE STRINGS
The answer is clear as mud. The SEC has typically drawn a line between the boiler room tactics of Jordan Belfort (a.k.a. the Wolf of Wall Street) and the sharing of stock tips among friends and family. The former is considered market manipulation, while the latter is often the forgivable result of too much alcohol at a family gathering.
But what happens when your friends include 65,000 fellow Discord traders or 100,000 Twitter followers? By spreading unvetted stock tips far and wide, social media influencers are starting to look more like the hype machines of the 1980s than enlightened stock gurus at the family barbecue.
