![]() Savvy plays on rookie investors are one longstanding aspect of the market. “Folks have been getting hustled in pool halls for generations,” he said. That, despite Cramer’s dramatic proclamations about the market’s broken mechanics, is nothing new, Sabino said. “But more likely, it is just folks ‘playing’ the markets against other folks who aren’t playing games,” he said. Singer speculates that there could be “some fraudsters” online trying to game the system, and push up the stock in order to make a profit. “What I think is happening is that you guys are making such an impact that these fat cats are worried that they have to get up and put in work to earn a living,” the moderator said. “Is their prime motivation that ‘this stock price needs to stay up or I will lose my shirt?’” he added.īack on Reddit, one moderator pushed back hard on the idea that users are manipulating the price to their advantage. “Are they, in fact, an unorganized group of disparate retail investors,” he said, “or are they a more organized group of investors, or a group of sophisticated investors.” Read also: Chris Sacca mocks ‘Robinhood bros’ who spurn his investment advice: ‘Stonks never go down!’Ĭhildish comments or not, Sabino said regulators would be curious about what’s motivating those investors who are driving up the stock price. Posting somewhat childish comments and then flaming other posters,” Singer ![]() Of newbie traders swirling around the stock-du-jour and spending hours each day “That clearly poses a problem when we’re dealing with a lot They also have to show that the person making those misstatements knew at the time they were untrue, misleading a “reasonable” investor who, in turn, was harmed. Regulators and prosecutors attempting to prove fraud have to show the behavior involved untrue statements or omission of important fact, said Singer. But saying, for example, a company received a patent when it didn’t in order to push the stock higher is out of bounds, she said. To fraudulently promote foolish investment decisions,” she said.įor example, a comment like “I think this is the greatest stock ever” is within bounds, Roper said. Protection for the Consumer Federation of America. Investment decisions,” said Barbara Roper is director of investor “As a general rule, people are allowed to make foolish Important misstatements of fact to dupe the investing It is arguable that these people are all one group.” (Cramer also said his securities lawyer told him the call to buy the stock among social-media users was protected under “free speech.”)īut what would regulators need to.do in order to start building cases against such buyers and sellers? “The mechanics of the market are breaking down. That’s opinion,” Singer said.Įarlier Monday, CNBC’s Jim Cramer was flummoxed by GameStop’s upward march. You have the right to press your bet and urge others to join you. “You have a right to your opinion, on- and offline. “Distinguishing what is a sincerely held belief as opposed to an attempt to manipulate the market is extraordinarily gray, and it is an extraordinarily fuzzy area,” said Sabino.īill Singer, veteran securities attorney at Herskovits PLLC, told MarketWatch that “although there may be a fine line between urging folks to buy/sell shares in a given stock and a fraudulent intent to manipulate that outcome, that fine line is still there.” government to stem the deadly economic impact of COVID-19.On top of that, online trading platforms like Robinhood, Stash and others have made it easier to bet on stocks, while platforms like Reddit have provided a virtual venue for investors to exchange ideas, and sometimes make coordinated bets on companies like GameStop. In many ways, trading in GameStop highlights the speculative fervor in a market where average investors are emboldened by super-low interest rates and a flood of liquidity pouring into financial markets from the Federal Reserve and the U.S. “ ‘As a general rule, people are allowed to make foolish investment decisions.’ ” - Barbara Roper, director of investor protection for the Consumer Federation of America
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