WASHINGTON – Federal prosecutors and regulators are investigating whether market manipulation or other misconduct fueled the rapid rise in stock prices last month such as GameStop Corp. and AMC Entertainment Holdings Inc., according to individuals familiar with the matter.
The Department of Justice’s fraud department and San Francisco’s U.S. attorney’s office sought information about the activity from brokers and social media companies that were hubs for the business frenzy, people said. Prosecutors sent information from brokers such as Robinhood Markets Inc., the popular online brokerage that many individual investors used to trade GameStop and other stocks, people said.
GameStop shares rose from about $ 20 to $ 483 over a two-week period in January. Since then, the stock has dropped to about $ 50. It was fueled by an army of soaring individual traders urging each other on Reddit to buy shares and squeeze out hedge funds that looked like the price would go down. Traders who bet that stock prices will fall are known as sellers soon.
In addition to the survey conducted by the Justice Department, the Commission for the Future Trading of Goods is examining similar trading, people said. The CFTC has opened a preliminary investigation into whether the misconduct took place, as some Reddit traders targeted silver futures and the largest silver-traded fund, the iShares Silver Trust, said one of the people.
The Wall Street Journal reported that the Securities and Exchange Commission is also reviewing the trading frenzy. The SEC and the CFTC are civilian regulators. The burden of proof in a regulatory action is less than in a criminal case.