[ad_1]
Former SEC Chairman Jay Clayton told CNBC on Friday that he did not believe the commercial frenzy sparked by Reddit in GameStop actions amounted to an illegal pump and dump scheme.
Clayton, who headed the Securities and Exchange Commission under former President Donald Trump, made the comments in response to a question from CNBC’s Joe Kernen. The “Squawk Box” co-host asked if Clayton felt the events of late January were “a modern pump and dump using social media.”
“The quick answer to that question is no. I don’t think so, from what I’ve seen,” said Clayton, who recently joined his former law firm, Sullivan & Cromwell, after resigning from his position. position of principal securities regulator of the us
Earlier this month, Bloomberg reported that the SEC was investigating social media posts to determine if fraud was a factor in the sky-high rise in GameStop shares, which rose from less than $ 20 in early January to a record high. intraday from $ 483 on Jan. 28. a gain of more than 2,300%. However, the stock has fallen sharply since then, closing Thursday’s session at $ 40.69 per share. According to Bloomberg, the SEC, in particular, is looking for elements of disinformation intended to bias the market.
According to the SEC, a pump and dump system takes place when market participants disseminate “false or misleading information” in an attempt to trigger a buying spree. Once the stock price has been inflated, a trader will throw away the stocks he holds at the artificially high price.
Clayton said that from what he can tell, the people trading GameStop shares were pretty clear about the motivation. “When you look at the overall participation in this, what was going on here was pretty transparent,” he argued. “People were very transparent about what they were doing and why they were doing it, which was quite interesting.”
Reddit’s WallStreetBets forum was a place where retail traders flocked to post on GameStop. Keith Gill, a prominent member of the online community, took part in Thursday’s congressional hearing devoted to the events surrounding the GameStop short squeeze.
Gill sought to defend his actions regarding the heavily shorted stock, saying he has a genuine belief that stocks are undervalued by the market and feels confident enough to share his investing thesis. In addition to posting on WallStreetBets under the name DeepF —— Value, Gill also posts YouTube videos under the name Roaring Kitty.
A proposed class action lawsuit has been brought against Gill in federal court in Massachusetts. The lawsuit alleges that Gill did not disclose his financial history and prompted individual investors to buy GameStop at unreasonably high levels.
“I did not solicit anyone to buy or sell the shares for my own profit. I did not belong to any group trying to create movement in the price of the shares,” Gill said in his prepared testimony, saying he had was “very clear that my channel was for educational purposes only.”
“The GameStop share price may have gotten a head start on itself last month, but I’m as optimistic as I’ve ever been about a potential turnaround,” added Gill, who said he first bought GameStop shares in 2019. In his last Reddit post, Gill said he made $ 7.8 million on GameStop.
The GameStop action was one of the most shorted on Wall Street in January. Short sellers borrow shares of a stock and then sell them quickly, with the goal of buying back shares later at a lower price. They then return the borrowed stock and earn money on the difference. When the opposite occurs, short sellers may seek to buy back the stock at its current higher price in order to minimize losses.
During the frenzy, GameStop’s actions faced upward pressure from two sides. There were short sellers who were trying to hedge and investors who bought outright stocks and call options.
Pressed by Kernen on how the social media posts on GameStop were different from historic pump-and-dump projects, such as Jordan Belfort’s’ Wolf of Wall Street ‘Stratton Oakmont, Clayton replied:’ I think in the ‘abstract, you make a good argument that it’s no different in that a group of people decide they like it [same stock]. “
However, Clayton added: “If they all got together and did it together like the Stratton Oakmont did, knowing the game’s end here, I don’t think so.”
Disclosure: Jay Clayton is a CNBC contributor.
[ad_2]
Source link