U.S. government investigates whether GameStop stock prices are manipulated

Input 2021.02.12 11:21

The’game stop situation’ is leading to controversy over stock price manipulation. When it became known that famous short-selling institutions had short-selled the stock, individual investors declared a’war’ with the short-selling institution and bought GameStop shares to defend the stock price.

GameStop’s stock price has risen vertically from $20 (22,000 won) to $483 (534,000 won) in two weeks, then has fallen back to the $50 range (50,000 won).

According to the Wall Street Journal (WSJ) on the 11th (local time), the Ministry of Justice and the San Francisco Federal District Attorney’s Office are investigating related activities from stock exchanges and social media companies, which have been the epicenter of the GameStop stock frenzy.

The prosecution is reported to have sent subpoenas to some online securities companies, such as Robin Hood Market, which individual investors used to trade stocks such as GameStop, requesting data submission.

The game stop situation is garnering a lot of attention as individual investors won the fight against short selling, but some raise suspicions that it may be a manipulation of the stock price through social media.

According to the WSJ, some experts argue that some ants participated in a kind of price manipulation called’pump and dump’ through reddit bulletin boards. A pump and dump is an illegal transaction in which false information about stocks purchased at a bargain price is spread online to raise stock prices and then sells the stock to obtain a profit.

Prosecutors and regulators are likely to first determine who actually bought and sold GameStop stock from the data used by securities companies. However, even if we understand the transaction details, it is expected that it will not be easy to contrast with publishers who have posted related articles on social media. This is because most users post anonymously on Reddit.

If it is investigated that a small number of key figures incited the purchase of the GameStop group, this situation is expected to turn into a stock price manipulation case. However, it is impossible to prosecute those who have traded small amounts or believed to be in the’war against hedge funds’, securities lawyers explained.

In addition to the Ministry of Justice and the prosecution, the Securities and Exchange Commission (SEC) is also looking into whether there has been any illegal activities, such as manipulating market prices, related to GameStop.

WSJ said that the US Commodity Futures Trading Commission (CFTC) is investigating the intensive buying behavior of silver futures and silver ETFs (listed index funds) by individual investors through the Reddit discussion room, similar to GameStop.

Reporter Eunjoo Ryu [email protected]

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