Very crazy things occurred in the trading world of the stock market in January of 2021. An investor group on a sub-reddit known as WallStreetBets beat institutional investors at their own game. In the month of January, the group invested heavily in stocks like GameStop, AMC, and others like Nokia, in order to drive the prices of those stocks higher. The purpose, aside from making a profit, was to send a message to Wall street. One of their regular practices is to short sell stocks with heavy institutional funding(billions of dollars) to make a profit. The act of coordinated-institutionalized short selling only hurts the companies stocks and doesn’t benefit the market or individuals who invest. Companies sometimes go out of business because of such a practice.
One of the biggest hedge fund firms to lose from the exchange was a firm called Melvin Capital who is also one of the biggest firms on Wall Street. Along with Melvin Capital, short selling hedge funds lost almost 20 billion dollars from this exchange from GameStop traders. The firm Melvin Capital specifically lost billions of dollars as they bet against the rising price of the GameStop stock; ticker symbol “GME”. The WallStreetBets community was able to out bet the hedge fund and pump GameStop’s stock higher by orders of magnitude of what it would have been otherwise. The current record being over 1900% of it’s price before the exchange; with a peak of $483.00.
This is where corrupt activity begins to take place. Even more so than what would have originally happened with the hedge fund short selling practice. In order to cover for their loss from short selling, Melvin Capital received 2.75 billion dollars in emergency bailout money from their parent corporation, Citadel, LLC. That’s not the only thing that occurred though. The investment app called Robinhood – an app which is very popular and widely used for investing – “conveniently” stopped their users from being able to purchase GameStop stock, while Melvin Capital gained money to regain their short positions. Unsurprisingly, the capital that Melvin regained was able to put pressure on GME price, so it would go down again, without new opposition from Robinhood investors. The act caused GME to fall from over 400 dollars to $198.60. After serious pressure from the news and regular traders, Robinhood lifted it’s restrictions and buying pressure returned the stock to a price of $325 before the market closed on Friday January 29th. This is incredibly corrupt and highly disturbing.
As though dark and mysterious forces were forced to come out of the shadows, Robinhood exposed deep seeded corruption that governs how the company is run. For example, Citadel, LLC is an investor in Melvin Capital. What’s more, Citadel LLC is the biggest customer of Robinhood, which is the investment app that stopped customers from trading GME briefly on Friday. In other words, this is a corrupt trust of individual firms all working together to steal, not earn, a profit from the private individual investors who use Robinhood and other investment firms. This Triad of corruption as it could be called should not be allowed to exist in a free market society, and yet, it does. What’s worse is that this Triad that has been uprooted and exposed for everyone to see, is just the tip of the iceberg for other trusts and secret circles of insider hedge funds who manipulate the market to steal the money of private customers through ridiculous institutional pressure in the market. In other words, there are plenty more that also need tighter regulation.
This same corruption is what people blame the housing collapse of 2007 and 2008 on. Many millions of Americans had their lives and economic welfare destroyed by the selfish actions of the few on wall street. And no one got punished for it. These unique circumstances that exposed this corrupt activity is important for people to see so tighter regulations can be placed on these institutions responsible for hurting millions of people.
That’s not all this exposure of corrupt action revealed though. Curiously, the suspicious activity behind the Robinhood stock buying suspension may even go beyond the Triad of corruption. A rumor that was posted on reddit and other social media platforms claimed that the Whitehouse and other big investment firms placed calls to Robinhood to close off trading to individual investors of GME. The anonymous poster claimed to be a low-level employee of Robinhood that overheard the conversations taking place inside their firm. While some have tried to downplay this, it’s the only rational explanation for the corrupt activity that took place in the public eye. The anonymous poster even has evidence to back up their claim. For example, it’s common knowledge that President Biden is heavily bought out by Wall Street. It almost goes without saying. Interestingly, his Secretary of the Treasury, Janet Yellen, has taken $810,000 from Citadel, LLC. The same firm that is Robinhood’s biggest customer. Suddenly, the anon’s post talking about inside pressure from the Whitehouse and other firms holds a lot of credibility. Biden’s press secretary, Jen Psaki has told the public that Yellen’s payoffs are “no cause for concern”. Payoffs of any kind from any corporation to a politician or cabinet member are incredible cause for concern. Corporate donations always lead to favors and this rumor is an excellent example of where one could have easily taken place. What the week after January 29th will bring for the future of investing is unclear.
A couple important things are certain though.
- People who took part in shutting down Robinhood should be held accountable for this criminal activity.
- Larger firms should not be allowed to deliberately halt trading of certain brokers so they can continue to illegally manipulate the stock market. As explained above.
- The law applies to all American citizens, no matter who they are!
- Un-regulated short selling by large hedge funds leads to companies losing money and causing them to go out of business
- The practice of institutional short selling by large firms to downplay businesses is criminal, especially when large investment firms pool their money to place pressure on companies with honest and hard working American jobs hanging in the balance.
- Practices of this kind need significantly stronger regulation in order balance market activity for individual investors
Curiously, many news corporations are trying to dissuade people from buying Gamestop stock because they will ‘only be hurting themselves’. Some people have even had the audacity to call what the WallStreetBets community did as criminal, even though large hedge funds do it constantly without regulation from the government. These statements are hypocritical and it’s obvious that their intent is geared toward helping the hedge funds continue with their scam. By shifting blame, they are hoping to continue to keep their corrupt practice ongoing for as long as possible. This shouldn’t be allowed to persist.
While these hedge funds are praying that the public forget all about this, it’s important that people lobby congress for tighter regulation on this practice. Don’t let the desires of the greedy few control how you’re allowed to live in a country that’s promised you a free market and equal opportunity.
Democratic Senator Sherrod Brown has stated that he would hold a Senate hearing on the current state of the Stock market in order to find new ways to regulate corrupt Wall Street practices like the one mentioned above. It’s highly encouraged that you follow this event to weigh in on the issue. Your voice matters! And so does your Freedom!