Even The U.S. Justice Department Is Looking Into The GameStop Stock Fiasco

Even The U.S. Justice Department Is Looking Into The GameStop Stock Fiasco
Photo: Michael M. Santiago, Getty Images

While the dust starts to settle around GameStop’s meme stock phenomenon, investigations into the hedge funds, trading platforms, and the Reddit community that fuelled it are just getting started. Many people have already lost a lot of money, but even more could be on the line if lawmakers and regulatory agencies discover that actual laws were broken.

Yesterday, the Wall Street Journal reported that the U.S. Justice Department’s fraud section and the San Francisco U.S. attorney’s office were both seeking information “from brokers and social-media companies that were hubs for the trading frenzy.” In theory, any cases that arise from these probes would be criminal, which would be harder for regulators to prove but also carry heavier burdens for any potential wrongdoing.

But as the Wall Street Journal reports, the U.S. Commodity Futures Trading Commission and Securities and Exchange Commission are also looking into what happened with GameStop. As civil regulators, they could end up fining some of the traders or companies involved. Massachusetts securities regulators are also reportedly involved, with the office of the Secretary of the Commonwealth subpoenaing Reddit trader DeepFuckingValue, aka former insurance marketer Keith Gill, to testify at a state hearing later in the month.

Screenshot: Google Screenshot: Google

All of this comes as Congress prepares to hold its own hearings on how people like Gill and others on the WallStreetBets subreddit managed to take advantage of big bets placed by hedge funds and commission-free trading apps like Robinhood to pump GameStop stock from the low double digits early in January to over $US400 ($516) a share during the height of the meme stock bubble. Rep. Maxine Waters, the chairwoman for the House Financial Services Committee, previously requested Gill also attend the House’s hearing on GameStop scheduled to take place February 18.

Yesterday, The New York Times reported that Reddit executive Steve Huffman would also testify at the hearing. A representative of Citadel, one of the hedge funds at the centre of the trading, is also expected to attend in addition to a possible appearance from its founder and CEO, billionaire Kenneth C. Griffin. In addition to Citadel Melvin Capital, a hedge fund that bet big shorting GameStop and other companies (and lost billions in the process), Citadel’s sister-firm Citadel Securities, which he also founded, is one of the market makers responsible for executing a large portion of the stock trades people make on platforms like Robinhood. Waters also previously suggested calling a representative of Melvin and Robinhood co-founder and CEO Vlad Tenev to attend the hearing as well.

Robinhood came under fire from angry users and a number of members of Congress after it halted trading of GameStop and other meme stocks on its platform, which it later said it did because it didn’t have enough money on hand to cover the trades users were making on the extremely volatile stocks. The clampdown on trading was followed by a number of severe drop-offs in the value of GameStop’s inflated stock price and was ultimately followed by its relative collapse (it’s currently at around $US50 ($65), which is both much higher than a year ago and much lower than its peak last month).

Because of Citadel’s connection to both Robinhood and a hedge fund shorting GameStop stock and Robinhood’s halt on GameStop trading, there are many questions around the timing of events and who gained and lost because of them. The GameStock stock debacle also highlighted larger issues around the absurd but seemingly completely legal ways that people can try to make money on Wall Street by placing wild bets and then forming a subculture around them on Reddit. We’ll see if Congress or anyone else manages to actually get to the bottom of what was going on, much less fix it.


  • “REEEEE, only rich people can manipulate the market to make money. Damn poor people, learn your place.”
    Is basically what i’d sum up the reaction to this situation as by a lot of american media and big groups.

    I personally think its great some more regular people managed to make money off the bullshit that is stock trading/wall street.

    • Since when has upper middle class been poor? Many of the starts of this movement hold thousands of stocks around the place. FAR from poor. Certainly not rich either…

    • Except mainly rich people made money with GameStop, while quite a few less well-off people bought near the top of the market and did their dough. A bunch of other people held their stock well past the peak and are also more or less back where they started, or below water. All of that in buying stock in a company that by any objective measure is dying a slow, painful death.

      Sure, a few human interest stories did make some money, and the sensible ones sold out early, but GameStop is hardly a story of robin hood.

      In fact, as more evidence emerges it’s becoming increasingly clear that the real winners from the GameStop share market gambling meme were mostly large Wall Street hedge funds and other insiders with the technology and algorithms to pick the highs out of stock market fluctuations, sometimes buying and selling the same stock several times a day.



      • Rich people have more disposable assets to get richer with in the first place. Investment 101. Nothing you’ve said is remotely radical. WSB was largely holding on to spite bleed Wall Street, not to get rich. They’re a bunch of broke morons who do it for fun or entertainment, not with the expectation of being millionaires. This is something you and large majority of the media fail to understand.

        • So, we agree then? For sure I’ve never been a cheerleader for the WSB meme mob. Maybe you are thinking of djbear?

          • We do agree, but you’re carrying on like the rest of us don’t understand this already. Everyone knows the rich get richer and occasionally dickheads like WSB make them a little bit poorer for shits and giggles when they’re caught with their pants down.

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