Martin Shkreli famously did this with a tweet. So did Phil Falcone. One is in prison (for unrelated securities fraud) and the other was permanently barred from the investment industry by the SEC for securities fraud and market manipulation. Falcone was motivated by equal parts profit and revenge, though, so his case was particularly egregious.
Where is the line is between market manipulation and just... the market? I couldn't tell you. One or a few people working in coordination to create a short squeeze and they're definitely going to get a call from the SEC. A few thousand Redditors working in coordination to create a short squeeze? I guess we'll find out what the SEC thinks.
My understanding when it comes to market manipulation based on speech is there must be some element of deceit. I.e. saying "We should all buy GameStop because they'll have better technology than Netflix" is a lie, and if people believed it would be classic pump-and-dump market manipulation. Saying "We should all buy GameStop to engineer the short squeeze of the century and fuck over greedy hedge funds" is completely transparent, truthful, and legal.
> Saying "We should all buy GameStop to engineer the short squeeze of the century and fuck over greedy hedge funds" is completely transparent, truthful, and legal.
To be clear I’m not saying it’s definitely illegal because I’m really not sure and I think you could make the argument either way. But I absolutely would not characterize it as “completely transparent, truthful, and legal”.
I think the SEC could at least make the argument that WSB redditors collectively were essentially activist investors acting in concert and failed to make the relevant disclosures to put the market on notice. And, in the eyes of federal securities laws, failing to disclose material information is akin to deceit.
I‘m not saying the SEC will (or even should) make that argument but I am saying that this is absolutely not nearly as cut and dry as you think. Not by a long shot.
I actually think it is pretty cut and dry. "Acting in concert" would require some sort of actual agreement between parties, e.g. "I'll buy if you buy." That's not what is going on in WSB. Everything I've seen on WSB should be protected as free speech, as people are just voicing their opinions and explaining how short squeezes work.
Free speech has nothing to do with it. Nothing. Absolutely nothing.
And working as a group does not need to be an explicit agreement like you think it does. You’re certainly entitled to your opinion as I am mine. Having experience dealing with the SEC as a securities lawyer I’m of the opinion its anything but cut and dry.
How are ideation dinners legal, or obvious conflict of interest when a market maker has stakes in a hedge fund - are they transparent about their shady collusions be it implicit or explicit? Atleast wallstreetbets is readable by anyone and everyone.
> Free speech has nothing to do with it. Nothing. Absolutely nothing.
That doesn't make sense. Any restrictions on speech (e.g. prohibiting lying in commercials, prohibiting yelling fire in a crowded room, etc.) always need to go through the lens of whether there is a "legitimate government interest", because the courts have been very clear that any restrictions on speech much have a clear rationale. If the SEC wants to argue that posts on a public website forum are somehow collusion, they need to argue why those posts are not protected by the first amendment.
Of course, it's easy to come up with a clear rationale for why one would limit speech in this case, and "commercial" speech is much more open to restrictions. However, I don't see how one could argue "I'm buying a shit ton of GME, and I think you should too, because I want to screw over the hedge fund guys" is any different, just because it's on a forum, from all the other types of investment advice and theories that goes out all the time.
Where is the line is between market manipulation and just... the market? I couldn't tell you. One or a few people working in coordination to create a short squeeze and they're definitely going to get a call from the SEC. A few thousand Redditors working in coordination to create a short squeeze? I guess we'll find out what the SEC thinks.