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Serious question for someone that understands securities law: Is WSB essentially a crime scene for a widespread market manipulation fraud and conspiracy? From

Serious question for someone that understands securities law: Is WSB essentially a crime scene for a widespread market manipulation fraud and conspiracy? From what I've read on the SEC site: "Although some short squeezes may occur naturally in the market, a scheme to manipulate the price or availability of stock in order to cause a short squeeze is illegal." https://www.sec.gov/investor/pubs/regsho.htm https://www.sec.gov/investor/pubs/regsho.htm

anupamchugh 6y ago
I don’t think so... if WSB is being criticised for market manipulation, then so should be hedge fund managers. Everyday we see institutional investors setting new price targets for certain stocks—which definitely drives up the price. People are just criticising WSB since newbie investors backed dumb stocks.
- grepthisab 6y ago
  Someone else committing a crime isn't really a defense to one's own crime though.
  - b3kart 6y ago
    No, but if a law is applied inconsistently it raises questions about whether 1) the law is sensible 2) the regulatory system is unbiased. Pointing to such inconsistencies is a perfectly reasonable thing to do.
    - VWWHFSfQ 6y ago
      Resolving those inconsistencies in the law because of uneven enforcement would come quite a long time after the fact. But as the law stands now, this is probably illegal. I doubt anyone will be prosecuted for it, though.
- anonuser123456 6y ago
  This seems to be the sentiment of a lot of people, but the SEC has in fact prosecuted hedge fund managers for just this tactic in the past. It is generally hard to prosecute because smart hedge fund managers don't leave a paper trail and leave a trail of plausible deniability. But in this case, people are literally admitting "Yes, I would like to engage in your proposed felony." Even manipulation aside... conspiracy itself is a crime. I don't think conspiracies suddenly become legal just because they were very large.
  - whomst 6y ago
    The key distinction AFAICT is that r/WSB isn't commanding people to buy, nor does it have any assets of its own. This is just a stochastic result of mania and individual investors doing what they believe to be in their best interest.
    - snet0 6y ago
      > r/WSB isn't commanding people to buy ehhhhhh... I've seen plenty of BUY BUY BUY posts. Unless I'm missing your point. I understand what WSB isn't a corporation or entity in and of itself, but it is still a (somewhat) organised group of uh... "investors".
      - anupamchugh 6y ago
        True... except they don’t call themselves investors. They relish using terms like autists, degenerates. Basically they enjoy sending across a message more than making a fortune today.. it’s like a cult
      - sircastor 6y ago
        But aren’t there plenty of “BUY BUY BUY” posts that result in nothing? My understanding prior to this was that r/WSB was typically a lot of hot air being blown around trying to drum up enthusiasm. No different than your uncle saying at the table “I’ve invested in... and it’s going sky high!” The bar to qualify this random association of people as organized seems pretty high.
- cm2187 6y ago
  I am not white washing hedge fund managers, but any hedge fund manager that would put in writing in an auditable system that he is considering manufacturing a short squeeze to hurt specific investors and went ahead and did it would have a tough time in court. No one with half a brain would do that (not that in recent history there hasn't been a handful of sub-half-brain bankers who documented their misdeeds in writing).
  - fma 6y ago
    Yeah, but if you're Bill Ackman you can do it on front of millions of people on CNBC. "During the epic verbal battle between Icahn and Ackman that was televised on CNBC in January, Icahn predicted that Ackman’s Herbalife investment could produce the “mother of all short squeezes.” Shortly after that incident, it became clear that Icahn had taken a big position in Herbalife’s stock. He has since expanded that position, bought 16.5% of the outstanding shares and gotten two representatives on Herbalife’s board." https://www.forbes.com/sites/nathanvardi/2013/07/22/carl-icahn-is-squeezing-bill-ackman-to-death-with-herbalife-trade/ https://www.forbes.com/sites/nathanvardi/2013/07/22/carl-ica...
im3w1l 6y ago
My hot take is that what they are doing is illegal, but when it comes down to it rulings are done by people, and the extent of their sympathy for the little guy will determine the outcome.
- nrmitchi 6y ago
  I agree with this. In my opinion, if you have to state multiple times in your plan that what you're planning isn't illegal/manipulation, it's very grey at best. The fact that one of the premises presented here for the price going up is "We buy a bunch of options, to force (ie, manipulate) someone else into buying the stock, so that the price can go up" doesn't boad well for a "it's not market manipuation" argument either. Straight from this post: > It looks like this: RH Call Option buying -> MM Delta hedging/share purchase -> short squeezing -> Greater retail/RHers price action chasing/call option buying -> MM Delta hedging/share purchase -> short squeezing -> Institutional and new channels flip the script -> GME to $400+ They've presented a chain of events that starts only with "We try to buy a lot of it", has a bunch of "other people have to buy based directly on our actions", they even through in a "other people see the price going up and try to pile in" (ie, screw the rest of retail). > the extent of their sympathy for the little guy will determine the outcome I don't see the masses of people ending up facing consequences here. I wouldn't be surprised if a group of WSB pushers who made out like bandits do see consequences. I also think it's going to be difficult to consider them the little guy if they make a bunch of money, and the much larger mass of non-WSB retail lose their shirts.
  - swimfar 6y ago
    " if you have to state multiple times in your plan that what you're planning isn't illegal/manipulation, it's very grey at best." I don't think this is logical. One could also say, "If people are accusing you of doing something illegal/manipulative and you don't respond by stating that it's not illegal, it's very grey at best."
  - vagrantJin 6y ago
    > much larger mass of non-WSB retail lose their shirts. Can we agree this is hyperbole?
fountainofage 6y ago
That same page also says "Investors and prospective investors should be cautious of rumors on chat rooms where the intent of nameless and faceless computer users is in doubt." So it'd be a question of which is it? Is it don't trust internet forums or is it people shit posting memes is a coordinated attack? Logically and morally you can't have it both ways. But we're seeing how morals don't matter when you go after the money.
- anonuser123456 6y ago
  An internet forum can be both full of rumors, and used for a conspiracy. I imagine people planning the US capital riots also posted a lot of rumors and memes. That statement is just advisory for investors to 'be cautious'.
deleted 6y ago
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eternalny1 6y ago
Absolutely not, it's just an open discussion of ideas. Straight from this post ... > This is not fraud. There is no manipulation here. We aren’t forcing anyone to do anything. It’s going to happen with or without us. But I want to ride.
- snet0 6y ago
  Well, if they say it's not fraud, who am I to say otherwise! Joking aside, the "we just like the stock" "this is not financial advice" stuff is as much a defence as the Someone Who Isn't Me thing I remember seeing on drug-related forums years back. You feel like it's protection because you're not getting prosecuted for admitting something you know is at least in the ballpark of law-breaking, but in reality you're just small-fry that nobody cares about. The moment a big-time dealer is under the spotlight, no amount of SWIM is protection. I don't expect anyone from WSB to receive repercussions for this, but afaik this is dangerous legal territory and their defensive phrasing is a facade.
  - eternalny1 6y ago
    To me, it seems like people just noticed something absurd in the market (a short % over 100) and were pointing it out. It was a perfect set-up for a historical short squeeze if the right catalyst came along. And that catalyst wasn't simply the people on WSB, there were other catalysts such as the Chewey founder coming in, and then earnings reports. Once those factors played out, the people who noticed the precarious position the hedge funds had put themselves in got to watch their exact predicitions come true. I don't see how that can be confused with a pump-and-dump scheme or any sort of market manipulation.
    - snet0 6y ago
      I think if it turns out that (and I have no idea if this could be the case) some of the "key" figures in riling up WSB were holding GME prior, and sold like 2 days ago, that would be a pump-and-dump, right? I'm not totally sure, but I believe that fits the criteria.
cm2187 6y ago
Not a lawyer but I would also be surprised that adding something like "let's discuss hypothetically..." at the top would be a defense against being accused of market manipulation if it is proven the person actually went ahead and transacted per the post.

anupamchugh 6y ago

I don’t think so... if WSB is being criticised for market manipulation, then so should be hedge fund managers. Everyday we see institutional investors setting new price targets for certain stocks—which definitely drives up the price. People are just criticising WSB since newbie investors backed dumb stocks.

grepthisab 6y ago
Someone else committing a crime isn't really a defense to one's own crime though.
- b3kart 6y ago
  No, but if a law is applied inconsistently it raises questions about whether 1) the law is sensible 2) the regulatory system is unbiased. Pointing to such inconsistencies is a perfectly reasonable thing to do.
  - VWWHFSfQ 6y ago
    Resolving those inconsistencies in the law because of uneven enforcement would come quite a long time after the fact. But as the law stands now, this is probably illegal. I doubt anyone will be prosecuted for it, though.
anonuser123456 6y ago
This seems to be the sentiment of a lot of people, but the SEC has in fact prosecuted hedge fund managers for just this tactic in the past. It is generally hard to prosecute because smart hedge fund managers don't leave a paper trail and leave a trail of plausible deniability. But in this case, people are literally admitting "Yes, I would like to engage in your proposed felony." Even manipulation aside... conspiracy itself is a crime. I don't think conspiracies suddenly become legal just because they were very large.
- whomst 6y ago
  The key distinction AFAICT is that r/WSB isn't commanding people to buy, nor does it have any assets of its own. This is just a stochastic result of mania and individual investors doing what they believe to be in their best interest.
  - snet0 6y ago
    > r/WSB isn't commanding people to buy ehhhhhh... I've seen plenty of BUY BUY BUY posts. Unless I'm missing your point. I understand what WSB isn't a corporation or entity in and of itself, but it is still a (somewhat) organised group of uh... "investors".
    - anupamchugh 6y ago
      True... except they don’t call themselves investors. They relish using terms like autists, degenerates. Basically they enjoy sending across a message more than making a fortune today.. it’s like a cult
    - sircastor 6y ago
      But aren’t there plenty of “BUY BUY BUY” posts that result in nothing? My understanding prior to this was that r/WSB was typically a lot of hot air being blown around trying to drum up enthusiasm. No different than your uncle saying at the table “I’ve invested in... and it’s going sky high!” The bar to qualify this random association of people as organized seems pretty high.
cm2187 6y ago
I am not white washing hedge fund managers, but any hedge fund manager that would put in writing in an auditable system that he is considering manufacturing a short squeeze to hurt specific investors and went ahead and did it would have a tough time in court. No one with half a brain would do that (not that in recent history there hasn't been a handful of sub-half-brain bankers who documented their misdeeds in writing).
- fma 6y ago
  Yeah, but if you're Bill Ackman you can do it on front of millions of people on CNBC. "During the epic verbal battle between Icahn and Ackman that was televised on CNBC in January, Icahn predicted that Ackman’s Herbalife investment could produce the “mother of all short squeezes.” Shortly after that incident, it became clear that Icahn had taken a big position in Herbalife’s stock. He has since expanded that position, bought 16.5% of the outstanding shares and gotten two representatives on Herbalife’s board." https://www.forbes.com/sites/nathanvardi/2013/07/22/carl-icahn-is-squeezing-bill-ackman-to-death-with-herbalife-trade/ https://www.forbes.com/sites/nathanvardi/2013/07/22/carl-ica...

im3w1l 6y ago

My hot take is that what they are doing is illegal, but when it comes down to it rulings are done by people, and the extent of their sympathy for the little guy will determine the outcome.

nrmitchi 6y ago
I agree with this. In my opinion, if you have to state multiple times in your plan that what you're planning isn't illegal/manipulation, it's very grey at best. The fact that one of the premises presented here for the price going up is "We buy a bunch of options, to force (ie, manipulate) someone else into buying the stock, so that the price can go up" doesn't boad well for a "it's not market manipuation" argument either. Straight from this post: > It looks like this: RH Call Option buying -> MM Delta hedging/share purchase -> short squeezing -> Greater retail/RHers price action chasing/call option buying -> MM Delta hedging/share purchase -> short squeezing -> Institutional and new channels flip the script -> GME to $400+ They've presented a chain of events that starts only with "We try to buy a lot of it", has a bunch of "other people have to buy based directly on our actions", they even through in a "other people see the price going up and try to pile in" (ie, screw the rest of retail). > the extent of their sympathy for the little guy will determine the outcome I don't see the masses of people ending up facing consequences here. I wouldn't be surprised if a group of WSB pushers who made out like bandits do see consequences. I also think it's going to be difficult to consider them the little guy if they make a bunch of money, and the much larger mass of non-WSB retail lose their shirts.
- swimfar 6y ago
  " if you have to state multiple times in your plan that what you're planning isn't illegal/manipulation, it's very grey at best." I don't think this is logical. One could also say, "If people are accusing you of doing something illegal/manipulative and you don't respond by stating that it's not illegal, it's very grey at best."
- vagrantJin 6y ago
  > much larger mass of non-WSB retail lose their shirts. Can we agree this is hyperbole?

fountainofage 6y ago

That same page also says "Investors and prospective investors should be cautious of rumors on chat rooms where the intent of nameless and faceless computer users is in doubt." So it'd be a question of which is it? Is it don't trust internet forums or is it people shit posting memes is a coordinated attack? Logically and morally you can't have it both ways. But we're seeing how morals don't matter when you go after the money.

anonuser123456 6y ago
An internet forum can be both full of rumors, and used for a conspiracy. I imagine people planning the US capital riots also posted a lot of rumors and memes. That statement is just advisory for investors to 'be cautious'.

deleted 6y ago

[deleted]

eternalny1 6y ago

Absolutely not, it's just an open discussion of ideas. Straight from this post ... > This is not fraud. There is no manipulation here. We aren’t forcing anyone to do anything. It’s going to happen with or without us. But I want to ride.

snet0 6y ago
Well, if they say it's not fraud, who am I to say otherwise! Joking aside, the "we just like the stock" "this is not financial advice" stuff is as much a defence as the Someone Who Isn't Me thing I remember seeing on drug-related forums years back. You feel like it's protection because you're not getting prosecuted for admitting something you know is at least in the ballpark of law-breaking, but in reality you're just small-fry that nobody cares about. The moment a big-time dealer is under the spotlight, no amount of SWIM is protection. I don't expect anyone from WSB to receive repercussions for this, but afaik this is dangerous legal territory and their defensive phrasing is a facade.
- eternalny1 6y ago
  To me, it seems like people just noticed something absurd in the market (a short % over 100) and were pointing it out. It was a perfect set-up for a historical short squeeze if the right catalyst came along. And that catalyst wasn't simply the people on WSB, there were other catalysts such as the Chewey founder coming in, and then earnings reports. Once those factors played out, the people who noticed the precarious position the hedge funds had put themselves in got to watch their exact predicitions come true. I don't see how that can be confused with a pump-and-dump scheme or any sort of market manipulation.
  - snet0 6y ago
    I think if it turns out that (and I have no idea if this could be the case) some of the "key" figures in riling up WSB were holding GME prior, and sold like 2 days ago, that would be a pump-and-dump, right? I'm not totally sure, but I believe that fits the criteria.

cm2187 6y ago

Not a lawyer but I would also be surprised that adding something like "let's discuss hypothetically..." at the top would be a defense against being accused of market manipulation if it is proven the person actually went ahead and transacted per the post.