DOJ opens federal probe into GameStop volatility
The U.S. Department of Justice has taken a greater interest in GameStop’s roller-coaster ride on Wall Street, opening an investigation into possible market manipulation and criminal misconduct.
The Wall Street Journal reports prosecutors are working alongside the San Francisco U.S. attorney’s office to gather information from brokers, including Robinhood, and social media companies such as Reddit that were gathering spots for individual traders.
Prosecutors are also looking at the surge in AMC Entertainment Holdings as part of this investigation.
It’s the latest in a growing number of investigations into the stocks’ rapid and stratospheric rise, and subsequent fall. The Commodity Futures Trading Commission and the Securities and Exchange Commission are also reviewing the trades. (And, as the Journal points out, the burden of proof is lower in those cases, because they are civil and not criminal.)
The House Financial Services Committee will also hold a hearing next week regarding the trades. Reddit CEO Steve Huffman is expected to testify.
Investigators are reportedly looking into whether a few key traders were behind the rush on the stock. While tracking who bought what is fairly easy, the difficulty comes in linking buyers to public posts on forums as Reddit is an anonymous community. Officials aren’t expected to focus on people who traded in small increments, as that would result in hundreds of cases which would be an administrative nightmare.
Interest in Reddit’s r/wallstreetbets community hasn’t waned, though. Since the beginning of GameStop’s wild ride, membership in the community has soared to over 8.9 million people—four times what it was at the start of the year.