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The SEC is hunting down possible misinformation on social media posts for signs of fraud in Reddit-driven trading frenzy, report says


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Summary List Placement

  • The SEC is scanning social media posts for signs of potential fraud in volatile trading, Bloomberg said. 
  • The regulator will hunt for misinformation intended to directly manipulate the market.
  • Users of the Wall Street bets forum mocked the move by hosting a discussion to greet SEC “interns.”
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The Securities and Exchange Commission is scanning through social media posts for signs of possible fraud in frenzied trading of hot stocks like GameStop and AMC, Bloomberg reported.

The regulator’s investigation is happening alongside a scrutiny of trading data to evaluate whether some posts were aimed at deliberately manipulating share prices, the report said.

Reddit day traders took on Wall Street short-sellers by scooping up shares in struggling companies, sending their stocks soaring. The SEC is specifically seeking out examples of misinformation that was intended to tilt the market, Bloomberg said, citing sources. 

Users of the Wall Street Bets forum took a jab at the regulatory move by posting a discussion thread to greet SEC “interns.”

“Hey whats up SEC I just really like the stock,” one user wrote.

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A spokesperson for the regulator did not immediately respond to Insider’s request for comment.

Shares in GameStop and other highly shorted stocks briefly retreated early this week. Still, the retail-trader favorites rebounded after traders banded together to “hold the line.” 

But pressure is growing on regulators to address the ramifications of the GameStop saga.

On Wednesday, Treasury Secretary Janet Yellen called on top regulators, including the SEC, to discuss recent market volatility. A meeting could take place on Thursday. 

Yellen has asked for a discussion of recent volatility in financial markets and whether recent activities are consistent with investor protection and fair and efficient markets, a Treasury spokesperson told Insider.

“Regulators will likely place additional scrutiny on the role of short positions and limiting the percentage they make off an individual stocks float,” said Nasser Khodri, group president at technology provider FIS. “I also anticipate new circuit break limits on stock movement to allow greater control in periods of extreme volatility.”

SEE ALSO: Mohamed El-Erian says the Reddit war against Wall Street players has all the elements of the Arab Spring – and he understands where the anger comes from

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