The Justice Department is targeting Muddy Waters for flooding the market with fake orders.
This ongoing investigation is one of the many probes targeting hedge funds for illegal short selling strategies.
After the ‘meme stock’ frenzy early last year, retail investors have been demanding the SEC investigate hedge funds after they removed the buy button specifically for ‘meme stocks’.
AMC and GME stock continue to be heavily shorted today weighing in at a high +20% short interest each.
Will regulators release the pressure suppressing these stocks to create a short squeeze?
That’s what we’re here to find out.
Welcome to Franknez.com – if you’ve been actively demanding for change in the markets, your voice has finally sparked it. Here are the effects a year later.
Let’s dive right into it!
Short-seller Carson Block receives FBI search warrant
The Founder of Muddy Waters Research was served with a search warrant by an FBI agent.
Muddy Waters Research is a hedge fund based in San Francisco, California with $227 million AUM.
Federal prosecutors are investigating whether short sellers conspired to drive the prices of stocks down.
The DOJ is looking at hedge funds to identify illegal trading tactics in the markets.
We’ve seen tactics such as naked shorting, high dark pool trading, and OTC trading just to name a few.
Gary Gensler just announced on a Bloomberg exclusive that 90%-95% of retail market orders do not get processed through the lit exchange.
This real problem allows short sellers to abuse the tools they have at their disposal.
Who will give retail investors 90%-95% of their return?
Hedge fund under investigation for “spoofing”
Spoofing is the term given to a tactic that illegally ploys fake orders into the market in to drive the share price of a stock down.
Millions of retail investors have noticed spoofing during intraday trading in both AMC and GME stock for over a year now.
The buy-to-sell ratio has shown us that short sellers are using this tactic to end trading days on red even when 80%-90% of the orders were bought for.
Retail investors have been buying and holding these stocks en masse but for months now the price charts don’t correspond to the demand.
Spoofing is a technique that has suppressed AMC and GameStop’s share price for more than a year now.
While short selling in itself is not illegal, hedge funds have overleveraged their power ever since retail became a real competition.
Citadel Securities received a $1.2 billion lifeline from Sequoia and Paradigm early this year too.
The hedge fund lost billions last year betting against ‘meme stocks’.
DOJ investigates hedge fund for “scalping”
Scalping is a term used when short sellers cash out their positions without disclosing it.
By not disclosing it, the share price of a security does not surge.
The DOJ is investigating hedge funds for this illegal short selling tactic.
If hedge funds have indeed been using scalping to suppress ‘meme stocks’, then this too would make a lot of sense.
I’d love to know your thoughts in the comment section of the blog below.
Will retail finally see price surges?
Retail investors want their assets to reflect the price of the true demand in the market.
*Regulators must lift the suppression imposed on stocks and let the share price run its natural course based on its supply and demand.
This is what activists must demand of our regulators.
Several short squeeze plays are bound to take off once hedge funds and market makers are prohibited from using predatorial strategies under law.