The YouTuber known as Roaring Kitty, who became the frenzy of GameStop stocks and worked as a broker until last week, could have legal issues for potential violations of federal rules governing brokers’ communications with the public.
Keith Gill, 34, placed a huge bet on GameStop stocks more than a year ago and shared his ideas for online stocks in the months leading up to the “meme stock” balloon.
But his comment may pose a problem for Massachusetts Mutual Life Insurance Co., which hired him and had a duty to oversee him.
Keith Gill, YouTuber known as Roaring Kitty, faces regulatory scrutiny
Massachusetts regulators are said to be investigating Gill and his former job as director of financial education for MassMutual.
The company told regulators it was unaware of Gill’s YouTube videos promoting the GameStop stock and that if it had known, it would have asked them to stop or fire it, according to the New York Times.
Although he did not advise specific clients on investment or insurance, he was not exempt from the regulations that strictly regulate the conduct of brokers, lawyers suggested securities for the Wall Street Journal.
Once obscure YouTuber has become an unlikely celebrity in the clash between small investors and large hedge funds and is seen by some as a popular hero and others as a dangerous market disruptor.
Gill first claimed GameStop as a potential investment more than a year ago
The financial industry regulator (Finra) could look more closely at Gill
After video game retailer shares rose 1,600 percent in January, while small investors inspired by Reddit’s WallStreetBets message board picked up the stock to punish hedge funds that bet against it, the balloon crashed into this week and fell by more than 70 percent Monday.
Gill worked as a “director of financial health education,” but was a registered broker. He has already grossed more than $ 13 million on his transactions and earned another $ 7.6 million in earnings since Wednesday, according to a screenshot of his brokerage account he posted on Reddit. At the height of the frenzy last week, his account was worth nearly $ 48 million.
Gill gave his approval to MassMutual on Jan. 21, but was still technically employed there until Jan. 28 as the GameStop frenzy neared peak, the regulator said.
Gill resigned from MassMutual on January 21, when GameStop shares exploded
He is a licensed securities broker, and licensed professionals have an “obligation” to inform their employers about their foreign activities, said William Galvin, secretary of the Commonwealth of Massachusetts.
On Friday, Galvin’s office sent a letter to MassMutual requesting information about Gill’s employment and whether the company was aware of his foreign activities.
“I’m not trying to inhibit anyone’s ability to access the market,” Galvin said. “The problem here is transparency.”
In the past six months, Gill has posted dozens of videos, most of which are related to his view that GameStop shares were undervalued and will increase as others have noticed.
Some videos have analyzed Gamestop’s previous performance and forecasts, but even posting online using a pseudonym does not absolve it of regulatory obligations, said lawyer Susan Light.
Gill is seen last week at his rented home in Massachusetts, where he has lived with his wife and two-year-old daughter.
GameStop shares, which rose 1,800 percent in January in a speculative bubble fueled by small investors, fell nearly 84 percent in the first four days of the month
An ordinary Joe can go to a website and say, “I like the XYZ stock.” A broker can’t do that. It would make sense for the Financial Industry Regulatory Authority (Finra) to be interested in looking into this. ”
“If you have a registered person who trades securities away from the company and makes recommendations to the general public, there may be a great longing for oversight,” said Brad Bennett, Finra’s former chief application officer at Jurnal.
“After 40 years in the industry, there is no doubt in my mind that if you are a registered representative [of a brokerage firm]”You shouldn’t communicate with anyone on Reddit,” said Bill Singer, a regulatory defense attorney. “That’s the safest thing to do.”
Gill’s videos included a disclaimer that said investors should consult with a financial advisor before making any investment decisions and “should not treat any views expressed on this YouTube channel as a specific incentive to make a certain investment ”.
Roaring Kitty continued to create topical memes about the rising price of the stock
Andrew Calamari, a lawyer for Finn Dixon & Herling and a former director of the Securities and Exchange Commission in New York, told the Times it was too early to determine whether Gill had violated any securities regulations.
However, he said that Gill could have broken the company’s rules at MassMutual if he had not received permission for his posts on Reddit and YouTube.
“Companies don’t allow employees to go out and make predictions in stock,” he said of employees other than analysts.
Gill has not posted on YouTube since January 22, and on Wednesday he announced on Reddit that he will step back from providing daily updates on his GameStop position there.
He remained largely silent on the controversy, apart from an interview with the Wall Street Journal last week.
“I didn’t expect that,” he said. “This story is much bigger than me … I support these retail investors, their ability to make a statement.”
Gill made an initial investment in GameStop of approximately $ 53,000 in June 2019. Subsequently, he added to the investment, pleading a total of $ 745,991.
A five-day view of GameStop stock prices shows a sharp drop from its peak last week
The price of GameStop shares is seen in a one-year view, which shows stocks rising and falling
In the latest videos on YouTube, filmed in his basement, he celebrated his success with up to 200,000 fans, wearing sunglasses and a welding band to hold his hair up to his shoulders and sinking the chicken offerings. (the pet food of his followers) in Prosecco.
Gill gained notoriety on the Reddit WallStreetBets trading forum, while posting regular updates to “YOLO” [You Only Live Once]’trading starting in 2019 under the username DeepF *** ingValue.
But Gill told the journal that her initial decision to buy – initially ridiculed in WallStreetBets before she was revered – was based on fundamentals about the company.
“People were making a quick buck, saying GameStop was the next blockbuster,” he said, referring to the video store, but almost devastated by the decline in retail sales and the growth of streaming services.
“It simply came to our notice then. It was a misclassification of the opportunity, ‘he said.