Yesterday, I wrote about the ongoing David versus Goliath battle taking place between small retail investors and the financial institution’s (Money Managers or “MMs”). Led by the Reddit “wallstreetbets” (WSB) community, retail was throttling the MMs for two weeks leading into Thursday morning. They were losing billions..I made clear that the MMs were getting desperate and that they were going to use every lever, relationship, or advantage to retake control and abort this financial revolution. So, up against the ropes, Wall Street did the only thing it knows how to do when it’s not getting its way: cheat..Seeing no way out of their reckless short positions in GameStop (GME) and other stocks, and absolutely hemorrhaging money, they simply changed the rules mid-fight. They blocked or manipulated peoples’ ability to buy any stock in any of the companies they had made bad bets on, including Canada’s BlackBerry (BB). Between Wednesday night and early Thursday morning, they exerted pressure on major trading platforms like Robinhood and even TD Ameritrade to remove customers’ option to buy, only leaving the option to sell..Canadian trading platforms, like Wealthsimple – a bit farther from the gravity of Wall Street’s corruption – only manipulated users by pushing warning notifications whenever someone would try and purchase these specific stocks. That kind of tactic does not work on everyone, but it will deter many risk-adverse buyers. And that’s the point..Think of stock prices like the housing market. The more people you have bidding on a house, the more it will sell for. So, if you artificially reduce the number of buyers or offers, you will also put significant downward pressure on the stock or house and it will sell for far less.. image-2Fox News Anchor Charles Payne .The news spread around the world like wildfire. Understanding that buying pressure was crippled, many investors, retail and institutional alike, began selling. GME plummeted from ~$480 to $112.25 USD. AMC more than halved from ~$20 to 6.51. BB, Palantir (PLTR), Nokia (NOK), and others all dropped significantly..This is stock market manipulation, plain and simple, and it is illegal. No volatility or risk determination was made by the US Securities and Exchange Commission (SEC) regulator. Again, they only blocked your ability to buy, they only restricted the stocks they were losing money on, and they only put these restrictions on platforms primarily used by small retail investors. The MM’s are free to continue trading as they see fit..The backlash was instantaneous and bi-partisan, with even Republican Ted Cruz and Democrat Alexandria Ocasio-Cortez agreeing that an investigation was necessary. Elon Musk, Mark Cuban, and many others jumped in to condemn the MM’s clear attempts to manipulate the market for their exclusive benefit. The hypocrisy, foul play, and potential illegality had been laid bare..Robinhood, in particular, attracted universal condemnation, if not only because of their stated goals of “democratizing finance” and “giving more people access to the financial system”. Multiple class action lawsuits have already been filed against it in several states..Those defending Robinhood’s actions point to its user agreement and that they reserve broad discretion to block or restrict trades. Others point out that that discretion is intended to be used in response to technical issues or market volatility (prices going up or down too fast). It is exceptionally rare for MMs to cut off trading in just a few stocks, and particularly just one direction, without any official determination or guidance from the SEC..The fact that all of the restricted stocks just happen to be those where the MMs are the only ones losing is just a coincidence… Robinhood needs to protect you against the real risk… of hedge fund owners only buying just one new yacht this year. (Fun fact: Robinhood was actually created by hedge fund operators and financed by them to boot).. Gamestop-meme-tweetGamestop subtweet of Robinhood .While GME and other stocks were plummeting, and retail investors were drowning Robinhood with 1-star reviews, the WSB forums exploded with messages of support from across the world. “CANADIANS COMING TO HELP – ALL CANADIANS BUY!”. People from China to Norway began sharing screenshots of their trading accounts to show they were “doing their part” to buy and keep the prices up. American retail investors scrambled throughout the day to open trading accounts on any new platform that would let them buy, including Chinese platforms..By the end of the trading day, GME and others recovered substantially. Like I said before, the MMs are terrified and they are desperate. Such blatant market manipulation is not a move you make if you have other options on the table. In trying to save a few billion dollars – which to them is drops in the bucket – the MMs have jeopardized their entire control over the gates to the financial system. They chose to have this fight when hundreds of millions of people are locked down and have nothing to do but be on their computers and smart phones all day long. At a time when many have lost their jobs, again, and are likely still resentful over 2007. Pride and greed cometh before the fall..The past two weeks were “A New Hope”, and in tanking Melvin Capital, regular folk celebrated in blowing up the first Death Star. Yesterday, however, was the beginning of “The Empire Strikes Back” and we all saw to what brutal lengths the MMs will go to. But people from all across the world and political spectrum are uniting, and if they can remain so, we are heading for the next big showdown..At the time of writing, GME is back to $400..Andrej Litvinjenko is the Financial Columnist for the Western Standard and a lawyer specializing in corporate and commercial law.
