Government agencies probe GameStop pump over potential illegal manipulation
DUNCAN RILEY, 11 February 2021
U.S. government agencies have launched federal investigations into whether the social-media-driven activity around GameStop Corp.’s share price rise in January constituted illegal market manipulation.
According to a report today in The Wall Street Journal, both the U.S. Department of Justice and the Commodity Futures Trading Commission are formally investigating the pump of GME stock, and the Securities and Exchange Commission is also reviewing the matter.
The investigation by the justice department is being led by the department’s fraud section and the San Francisco U.S. attorney’s office who have sought information about the security activity from brokers and social media companies that were at the center of the trading frenzy. Subpoenas are said to have been issued for information to brokers including Robinhood Markets Inc. that was widely used by those buying up GameStop and other shares such as AMC Entertainment Holdings Inc.
The CTFC inquiry is reported to be focusing on whether misconduct occurred by traders, not only those on Reddit but also those who targeted silver futures and an exchange-traded fund tied to silver.
The GME pump occurred on Jan. 26 when users of r/wallstreetbets, a forum on Reddit where amateur traders share stock and investment tips decided that its millions of users should buy GameStock shares and then later AMC. As a result, GME stock rose from $76.74 Jan. 24 to $347.51. AMC stock, which had been trading below $3, surged to a high of $19.90. Both stocks have declined since, trading at $51.10 and $5.61, respectively, as of the close of regular trading Feb. 11.
