Roaring Kitty, Robinhood Getting Sent Subpoena’s Over GameStop Rally

Subpoena’s are being handed out over the Gamestop rally. Roaring Kitty and Robinhood are among those getting those as well.

To put it simply, the Gamestop rally happened because a number of Redditors decided to, together, buy a bunch of Gamestop stock. Generally speaking, that’s all that really happened. The spinoff result is that people – namely hedge fund billionaire’s – who have shorted the stock would lose money. Motives for buying Gamestop vary from person to person of course. For some, it was to make short sellers “lose their shirts”. For others, it was to give Wall Street the middle finger. Some even bought in just because it was a fun idea.

The activity of working with others to buy or sell stock is nothing new by any stretch o the imagination. What might be somewhat novel here is the fact that all the planning and coordination happened right out in the open. Typically, this sort of activity is done in secret and out of the view of the public. At the end of the day, outside of the traders suppressing the Gamestop stock, who really cares people are blowing money on Gamestop stock anyway?

Of course, irregularities did, in fact, appear as a result of people buying Gamestop stock. Brokerage app, Robinhood, halted all buying of certain stocks including Gamestop. Instead, the app only gave the option to sell the stock. Some accused the app of going further by forcibly selling some users stock holdings. This sparked accusations of collusion and market manipulation. In fact, it even sparked lawsuits and even an investigation. The message from regulators is that they want answers as to what was happening in all of this.

Word is now surfacing that the next steps from regulators are being taken. According to CNet, subpoena’s are being handed out to Robinhood and Wallstreetbets:

The Department of Justice’s fraud section and the San Francisco US attorney’s office are seeking information about the trading frenzy from social media companies and trading platforms, according to a report Thursday from The Wall Street Journal. Prosecutors have reportedly subpoenaed information from Robinhood, where many of the trades happened. According to the Journal, Reddit is under investigation by the Commodity Futures Trading Commission (CFTC) as well for its part in possible misconduct with traders at the subreddit r/WallStreetBets who spurred the buying spree of GameStop along with other “meme” stocks.

The Department of Justice declined to comment. Reddit, Robinhood and the CFTC didn’t immediately respond to a request for comment.

Another report on CTV says that Roaring Kitty, a streamer who helped lead the charge to buy Gamestop stocks, is also receiving a subpoena from a Massachusetts regulator:

Massachusetts securities regulators have issued a subpoena seeking the testimony of a YouTube streamer who helped drive a surge of interest in GameStop Corp as part of a review of his registration, including his “outside business activities,” an official said on Wednesday.

The office of the Secretary of the Commonwealth William Galvin issued the subpoena on Monday, looking to hear later this month from Massachusetts financial advisor Keith Gill. Gill gained notoriety as “Roaring Kitty” on YouTube, making the case for buying shares of the video retailer with colorful language.

Gill until recently worked for insurance giant MassMutual and is a registered broker.

Gill became a key figure in the so-called “Reddit rally,” which saw shares of GameStop surge 400% in a week before crashing back to pre-surge levels. The volatility has also drawn scrutiny from U.S. lawmakers, the White House, the Securities and Exchange Commission (SEC) and the New York Attorney General.

One thing we should correct the record on, although the Gamestop stock did drop, it did not crash “back to pre-surge levels” as the article suggests. As of this writing, the Gamestop stock is hovering around 50 points. On January 11th, easily before the surge, the value was at 19.94. In fact, on August 14th, 2020, the stock was all the way down to 4.52 points. As a result, the value is actually still up by quite a bit. The article simply didn’t get that fact right from our perspective.

At this point, we are really hard pressed to think of anything Redditors did wrong. What Robinhood did is, at minimum, questionable. It’s difficult to gauge which direction these investigations are going here because we don’t know what is being asked by all parties. Still, it appears that government is on the move at this stage.

Drew Wilson on Twitter: @icecube85 and Facebook.

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