back
36 comments
My pet theory regarding why DFV held onto many of his shares so long is that he's trying to avoid SEC scrutiny. I don't believe he intended to create a bubble, but profiting from it too much might lead to legal action.
What law do you think he broke? We don't have any evidence to suggest he played both sides of the trade.

Personally I don't think he's worried. He has tons of Youtube videos in which he goes through his own due diligence. You're allowed to publish your thesis and position.

I didn't say he broke a law, I have no knowledge on that matter, but since the SEC is all three branches of government in one I don't expect it to be fair. However they are reportedly searching reddit for hype posts. I just figure you can't be accused of a pump and dump if there's no dump. IANAL
50 Cent did this about ten years ago. He was hawking a pink sheets stock on Twitter. At least one reason the SEC didn't come down on him like a ton of bricks because he never executed the dump after pumping it.
This is a ridiculous take in context of some of the things that institutional names get up to on national television.
If you’re going to hold someone else’s opinion up for ridicule, perhaps you should first consider the matter a bit more. If you mean institutional names as in individuals like the much maligned Jim Cramer, if you look into it you’ll find that there are very specific rules in place regarding his own ability to hold positions in the companies he discusses. This influencer we’re talking about reached similar if not greater sway over his audience, all the while directly profiting from their misunderstandings and gullibility. He may have hoped that his viral screenshots would save him from legal consequences, but in the end they may instead work against him. Of course, he had no personal brand name to trade on when he started out, so those very screenshots were also his best way of getting anyone’s attention in the first place.

The ones who deserve ridicule here are the people who continued to amplify this pump and dump long after it was readily apparent that that’s what it was. They are still doing this, including sadly here at Hacker News.

Pump and dump? Can you explain how you reached this conclusion?

It truly feels like WSB organically triggered a contrarian move against the shorts to squeeze them. At least that is the reality I see — so why should we reject this?

Although the exact time is a matter for debate, at some point, the value shorts exited their position and "buy and hold" remained the refrain. At that point it became a speculative bubble with no real end goal. The bubble is a pump & dump because there were still a lot of hype posts ("10k is not a meme").
> there are very specific rules in place regarding his own ability to hold positions in the companies he discusses.

Would that be...being CEO of a giant "nonprofit" charitable trust?

Yes, and one that has somehow avoided benefiting from cashing in on any quixotic public attempts at a short squeeze he personally launched and curated.
My pet theory is that he hedged it either in another account or partially through the retail etf
To be fair he took like 13m in profits and will have millions more if it levels off at 90ish. And remember we're just going based off screenshots, so if he were actually trying to be deceptive, he could just fake the screenshots. I hope he didn't, because that sounds like something the SEC wouldn't like. However yesterday's update he said would be his last, so I'm thinking his lawyer might have told him to shut up.
I still have yet to hear a compelling argument for this not being a pretty transparent pump and dump by some whales, institutional investors, or some mix of the two using WSB and associated social media as a mechanism to a) jack up the price, and b) keep it high while they exit their positions. There is a mature market for reddit accounts and reddit upvotes. It would actually be really strange if there had already not been at least one major instance of institutions or other sophisticated actors using social media to move prices for an options payday. Whats the argument that this isn't the case right now?
> I still have yet to hear a compelling argument for this not being a pretty transparent pump and dump by some whales, institutional investors, or some mix of the two

WSB was a relatively small sub up until the last month or so, and the rise in the price of GME didn't start until news sources started painting WSB as the creator of this "pump and dump", so I don't think this was initially created on WSB

> There is a mature market for reddit accounts and reddit upvotes. It would actually be really strange if there had already not been at least one major instance of institutions or other sophisticated actors using social media to move prices for an options payday.

Yeah, you're right, but people on reddit tend to be quite aware that new accounts with sufficient (100+) karma to post are readily available to buy, so they tend to be quite suspicious of these type of accounts (especially since the posting history is generally public) and usually call them out in the comments and/or get banned by moderators.

> Whats the argument that this isn't the case right now?

Putting aside their colourful language, there's a surprising amount of good due diligence (DD on the subreddit) done by its members. The idea is that given the number of stocks shorted is over 100% (As of Jan 1st it was ~121%, down from ~130%), the hedge funds will eventually have to buy back the shares, and that will cause a price spike. Yeah, the price of the stock has gone down, but if you check the sale volume in the last 2-3 days, you can see that it is no where close to the amount of shares that people have bought in the last month and a half or so. What this means is that even though the price is low, the number of people willing to sell at that price is still relatively small, so as soon as hegde funds are forced to buy back their shorted share the price will rise quickly because the number of people willing to sell shares at that price is low.

>WSB was a relatively small sub up until the last month or so

I'm not so sure about this, but it's relative. IIRC it's regularly hit /r/all for a couple years.

It already had enough power to affect the market that parts of wall street kept an eye on it (apart from the fact that many members are in fact part of wall street).
What I've learned over the past few days is that there is an overwhelming consensus among tech, SV, VCs, founders that really really despise the SEC / see it as complete ineffective.

Curious - how do people on HN feel about the SEC? I find HN more diverse of opinions outside the realm of the tech bubble so I'm interested to see if there are any contrarian voices here.

Considering the same person who is asking the SEC to investigate WSB just received 800k from citadel, and no one went to jail for the 2008 shenanigans, I would agree that the SEC is not effective at its job

There's some videos of Jim Cramer also taking about bribing the SEC back in 2006 so I wouldn't be surprised if it's still happening

Did she just receive $800k? Or was it years ago while she was not a public official?
The optics of investigating the “little guy” first tells you more about how effective the SEC is and who they serve.

Prior to this whole fiasco, I was indifferent towards them — but this just seems like blatant aggression towards retail investors.

I can't think of a recent time so many retail investors have been so directly taken advantage of as they've been during GME. (note the words recent and directly)

This was bigger than retail, but SEC should go after the people who started the pump and dump, even if they're small.

But they don’t hunt for fraud when hedge funds downtalk stock prices.
By Ben Bain (Bloomberg) -- U.S. Securities and Exchange Commission investigators are combing social media and message board posts for signs that fraud played a role in dizzying stock swings for GameStop Corp., AMC Entertainment Holdings Inc. and other companies, according to people familiar with the matter.

The scrutiny is being done in tandem with a review of trading data to assess whether such posts were part of a manipulative effort to drive up share prices, said the people, who requested anonymity because the review isn’t public. The regulator is specifically on the hunt for misinformation meant to improperly tilt the market, the people said.

The prevailing narrative is that Wall Street short-sellers were caught flatfooted over the past two weeks as retail traders banded together via Reddit message boards and bought up stocks that hedge funds were betting against. But some market participants, including famed short-seller Carson Block, have started to speculate that the short squeezes that drove GameStop, AMC and other stocks to exorbitant heights might have also involved professional investors who either took advantage of the Reddit-fueled frenzy or helped hype it.

The SEC hasn’t said whether there’s anything to Block’s theory, but acting chair Allison Herren Lee said in a statement earlier this week that the agency was looking at “compliance with regulatory obligations, adequate and consistent risk disclosure, and determining if any fraudulent or manipulative behavior has occurred.”

There is also mounting concern about the possibility of bot activity in Reddit’s WallStreetBets chat after a spokesperson for the forum told CBS News that there was a “large amount” of it and that some posts were being blocked by an automated moderation system.

While shares of GameStop have sharply retreated this week, pressure is growing on the SEC to figure out what happened. Senator Elizabeth Warren, one of Wall Street’s leading critics in Washington, has demanded that the SEC investigate the “casino-like swings.” Both the House and Senate are planning to hold hearings on the market mania, which triggered big losses for some retail investors and prompted Robinhood Markets, whose app was used by many of the traders, to raise $3.4 billion to cover collateral demands.

Treasury Secretary Janet Yellen has also called for a meeting of U.S. financial regulators including the SEC, taking her first public step to address the tumult.

“Secretary Yellen believes the integrity of markets is important and has asked for a discussion of recent volatility in financial markets and whether recent activities are consistent with investor protection and fair and efficient markets,” the Treasury Department said in a late Tuesday statement.

While the SEC doesn’t regulate social media or message boards, the agency has brought cases against people accused of making false claims about stocks online. In one case in 2000, the agency went after a 15-year-old for buying microcap stocks and then hyping the shares before quickly selling them for a profit. The teenager agreed to repay more than $270,000 in profit to resolve the allegations. In December, the SEC sued a day trader for planting false rumors about companies.

SEC investigations often take months or even years to complete so it’s likely that the GameStop tumult will be long over by the time the probe wraps up. Still, the agency’s findings could have implications for the broader retail market and lead to policy changes for short-selling, trade settlement, online apps and disclosure rules.

The SEC is also looking at how brokerages handled increased volumes and decided to restrict trading during the surge, according to the people. The agency is looking into whether the firms complied with rules and were consistent in how they made disclosures to their clients across the board when limiting transactions.

reply

There was definitely some serious spam in some of the GME threads. Paragraph or two of text flanked by emojis copied and pasted in root exact same level comments.
Seems to be behind a paywall?
Is there any investigation into Robinhood for banning purchases after its largest investor acquired Melvin's short position?
Probably not, since they were complying the governments own clearing house deposit rules.
There is a bit more to it than that. But it does appear to be above Robinhood's pay grade.

The private clearing house raised the holding requirement for GME from the usual 2-3% to 100%, making it impossible for smaller brokerages to put up the necessary funds. These are funds that must be on deposit with the clearing house for all buys (not sales). I read somewhere that at once point, nearly half of all robinhood users had bought GME.

so they said
Maybe they should be looking at the mass of naked shorting by Hedge funds - which is the REAL manipulation...

And NOT people engaging in the normal market mechanisms that the market uses up establish value - i.e. buying.

Do you have any evidence of this happening?
The ~130% of the shorted shares? This means that there are some shares out there that are basically IOUs and not actual shares On top of that, market makers are legally allowed to sell naked shorts as long as they find a share to cover that short within 3 days, likewise with naked puts and naked calls but with different time spans:

http://counterfeitingstock.com/CS2.0/CounterfeitingStock.htm...

This is not evidence of naked shorting.
If the first thing you do is put SEC investigators out there to see who shitposted, you won't _find_ evidence of naked shorting even if there's naked shorting out there.
Why should SEC be investigating naked shorting right now, without any evidence of naked shorting happening?