These are retail investors buying stock of their own volition.
What exactly did they do that’s illegal? What SEC regulation was violated?
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Well collusion and market manipulation are generally considered to be less than legal - whether done by big firms or a coordinated group of online amateurs.
But I understand the popular opinion is that since this is generally acceptable by Wall Street insiders then turnabout is fair play.
Just maintaining the earlier point that there are no innocents in all of this.
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The original Robin Hood (kind of ironic naming when you think of it) wasn’t exactly following the letter of the law either. You’re right that people are breaking the law and people are probably going to go to jail for this, but if you gotta root for somebody while the party’s still going, it might as well be the little guys.
They may be roguish bastards, but they’re our roguish bastards…which I can’t believe I’m saying about Reddit of all places…
Edit (Clarification): I am not an expert on securities and exchange laws, but it does appear that some people are engaging in what may be considered “pump and dump” behavior.
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I use JP Morgan and had issues this morning. I could buy but not sell. It cost me a small pile of money because I missed an opportunity to sell something at the moment that it needed to go. I should complain. I did take screen shots. I’m annoyed, but not enough to go wacky about it.
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Market manipulation requires deception — like fake rumors or press releases intended to trick others into investing. There was nothing like this - everything these people were doing was out in the open. Collusion has a very specific meaning here and I don’t think a bunch of individual speculators on Reddit buying a stock on the retail market to tr0ll short sellers meets that standard. That’s just investing.
I keep hearing people say how this was illegal but I have yet to see any specific law or regulation that was violated.
I’m no expert in finance laws and I’m happy to be proven wrong here.
Is it really, though? Is it illegally increasing the market price or is it just trading? The catalyst for driving the price up was people buying it and driving it up without deception which a pump and dump typically requires. Everything here was coordinated on the internet in public forums and the intentions were widely publicized.
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Sorry for the wall of text. The Securities Exchange Act of 1934 (Updated 2018):
(Note: I am not a lawyer, but the law looks pretty broad in how it defines this. I would say that there looks like there is a case against the main organizers of this on Reddit.)
(Edit for Clarity: Even without any deception about the stock, it would appear that the coordinated effort to drive up the price is illegal based on my non-expert read of this.)
PROHIBITION AGAINST MANIPULATION OF SECURITY PRICES
SEC. 9. ø78i¿ (a) It shall be unlawful for any person, directly
or indirectly, by the use of the mails or any means or instrumentality of interstate commerce, or of any facility of any national securities exchange, or for any member of a national securities exchange—
(1) For the purpose of creating a false or misleading appearance of active trading in any security other than a government security, or a false or misleading appearance with respect to the market for any such security, (A) to effect any transaction in such security which involves no change in the beneficial ownership thereof,
or (B) to enter an order or orders for the purchase of such security
with the knowledge that an order or orders of substantially the
same size, at substantially the same time, and at substantially the
same price, for the sale of any such security, has been or will be
entered by or for the same or different parties, or (C ) to enter any
order or orders for the sale of any such security with the knowledge
that an order or orders of substantially the same size, at substantially the same time, and at substantially the same price, for the
purchase of such security, has been or will be entered by or for the
same or different parties.
(2) To effect, alone or with 1 or more other persons, a series
of transactions in any security registered on a national securities
exchange, any security not so registered, or in connection with any
security-based swap or security-based swap agreement with respect
to such security creating actual or apparent active trading in such
security, or raising or depressing the price of such security, for the
purpose of inducing the purchase or sale of such security by others.
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For the purpose of creating a false or misleading appearance of active trading in any security
There was nothing false or misleading here. This was coordinated in public forums.
I don’t see any evidence of securities swaps or anything else here. These are individual investors playing the market based on public knowledge.
There is nothing inherently illegal about coordination either. People join investment clubs and trade stock tips all the time. As long as there’s no insider trading happening here that’s going to be a hard sell.
All this being said, I have no doubt if the SEC were to pursue this they could find something - it’s what they do. I’d be very interested in seeing what they can come up with if they do something here.
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I’m looking at (2) here. My read of this is that it is illegal to get together with a bunch of people and say, “Let’s all buy this exact stock at the exact same time just to drive up the price.”
(Intro) “It shall be unlawful for any person, directly or indirectly, by the use of the mails or any means or instrumentality of interstate commerce, or of any facility of any national securities exchange, or for any member of a national securities exchange—”
(2) To effect, alone or with 1 or more other persons, a series of transactions in any security registered on a national securities exchange, any security not so registered, or in connection with any security-based swap or security-based swap agreement with respect to such security creating actual or apparent active trading in such security, or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others."
I think that I was wrong to mischaracterize it as a “pump and dump,” but the Reddit activity does look like it may fall under the definition of manipulation if people did specifically say something to the effect of “Let’s all buy just to drive the price up.”
The thing with investment clubs and stock tips is that it’s hard to prove. The messages on Reddit, depending on how they are worded, could put people in legal jeopardy, I think. I would love to hear form a lawyer about this, because I will admit that I am not sure.
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Seems like it would be a tough balancing act between first amendment protected speech and determining actual fraud.
I don’t have any skin in the game here, I just find this whole thing fascinating. I agree though that it would be nice for an actual attorney - ideally one versed in securities - to weigh in and put us armchair lawyers in our place.
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Yeah, it is fun to armchair it, but we won’t get far without an expert. From what I can gather, though, market manipulation appears to be different from outright fraud (although both are prohibited).
I think that 99% of the people on Reddit probably have nothing to worry about from a legal perspective, but I’m sure that there are some bad apples on there who know exactly what they are doing and are making a killing from this. That’s still better than the hedge funds making a killing in my book, though.
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A Build-Your-Own-Katamari Arena
Through a curtain, like Blockbuster used to have in the WayBack, is an adult area for character reenactments and cosplay of selected non-violent GTA scenes
Tony Hawk skating clinics and smokeouts
Storytime with the Nameless King
Will it blend? Bring us your old games and find out
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Following up, sure enough, the big boys are bailing out Robinhood as a reward for their failure:
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I’m not sure if that means more shares than the company has issued, or only more shares than are available to buy on the market.
Either way, it’s kind of a hilarious image of the shorter having to buy the available stocks, delivering them to the broker, and then the broker selling them back on the market, saying “Fetch!”, as the shorter has to buy the same shares all over again for a higher price, repeat until they meet their obligation.
Despite being made illegal after the 2008–09 financial crisis, naked shorting continues to happen because of loopholes in rules and discrepancies between paper and electronic trading systems.
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I am completely ignorant about this whole phenomenon, but how can this process not be market manipulation in the first place? You dump a large amount of stock with the specific intent of buying it back cheaper than you sold it. Isn’t the original act of dumping the stock itself manipulating a drop in price and therefore the desired outcome?
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I work with all 20-somethings, and they are all nostalgic for GameStop because as teenagers, it was the only place they could buy video games. They’re not old enough to remember independent game stores or arcades, so for them, GameStop is it. They’re in the exact window between when GameStop bought everyone out, and when online sales started killing video game retail. Two of my coworkers even worked there as teens.
So, for a very specific age range of people, yah, there’s a lot of nostalgia. To me, they were always the evil empire that ruined gaming retail, but that’s not how younger people see it. It’s funny how we are nostalgic for whatever happened to be in existence at the time we were at that formative age.
For these Redditors, it’s probably also just a proxy war. GameStop is standing in for videogaming which they see as a religion and constantly under attack somehow. These are the same people from GamerGate.
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I guess. I mean jeesh, I have better memories of Toys R Us as a place to get games and Toys R Us was like KMart for little kids with runny noses.
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Yah, right there with you. I find it weird. To me GameStop is everything that’s wrong with America, not something to have fond memories of. 
I think people are getting Stockholm Syndrome with the current state of corporatized America. When you have a generation raised in a world with no independent stores, non-chain restaurants, or actual competition anywhere, people think that’s just how the world is and don’t think to question it. I see that in my 20-something coworkers a lot.
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Same with me. A 20-something co-worker was just talking about how she bought AMC over a year ago and is now giddy that her portfolio is up so high. She went on and on about her childhood memories about going to the theater and how much it meant to her that she was going to stay long on the stock.
While I’m thinking to myself how shitty AMC theaters are and how they sucked all the charm out of the old independent theaters and “corporatized” the movie experience.
Told her in no uncertain terms she needs to cash out now and take the money. She’s not gonna get another chance at a lucky windfall like this.
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It isn’t just young people. I heard an older person (60+) lamenting that because of all this Amazon stuff they were losing their K-Marts and Targets and other places to go shop. I was kind of puzzled and wondered to myself if she had lamented all the local stores her K-Marts and Targets ran out of business when they saturated the US.
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