The House of Fraud

As time goes on Wall Street's game of bankrupting beloved businesses in order to make absurd amounts of money is scrutinized more and more. A Reddit post by u/AndiCat sheds some light on this whole situation. They break down every illegal and predatory tactic that Citadel and other hedge funds have been using for years now. You can find the Reddit post here, it’s quite lengthy but it’s in-depth and worth a read.

The first item on the list is payment for order-flow and frontrunning. Payment for order-flow is when a brokerage firm (Robinhood) gets paid by a market maker (Citadel) to direct their users' orders towards the market maker. Citadel can then use the information they are getting from these orders by front-running stocks, buying or selling a stock based on that insider information, and making billions. As we all know using insider information is a big no-no for trading on the stock market and yet Citadel hasn’t even gotten punished for this. The only retribution I could find for this was this article by Bloomberg: SEC Chief Signals New Rules That Could Threaten Robinhood, Citadel.

The next issue u/AndiCat brought up was the massive amount of shorting that has been happening to many different companies over the years. Toys R’ Us, Tesla, GameStop, AMC, are just a few out of all the companies that have suffered through this tactic hedge funds love to do. The game plan with this is that massive hedge funds will short millions of shares trying to plummet the price so that they can make a quick profit. Citadel did this with GME but retail investors from Reddit saw this and started a counterattack that is still ongoing.

Following the counterattack from Reddit, Citadel and other hedge funds tried to swing the hype in their favor by having different media outlets post fake stories about how Reddit turned its attention to silver. This was immediately denied by the users on Reddit. And it doesn’t stop there, Redditors later posted direct messages they got offering money in exchange for them to post “negative sentiment” about GME on r/wallstreetbets. It’s clear from the desperate and blatant attempts to discredit GME from these hedge funds that GME poses a real threat to them. A threat that has and could further cost them billions.

U/AndiCat goes on to point out another highly unethical tactic that two corrupt hedge funds can pull off which is a short ladder. This is done by having these hedge funds trade shares back and forth at lower prices causing the price to plummet, all the while having shorted the stock which will have them recoup any losses accrued when selling. Some hedge funds did this with AMC back in April as seen with this picture provided by U/AndiCat:

Through all these dirty tactics ultimately the hedge funds are losing billions trying to stave off the GME squeeze and keep their losses to a minimum. But they underestimate the retail investors. GameStop is taking the second chance given to them and running with it by trying to move into the esports market. The future of GME and the stock market is looking good with retail investors finally standing up to the corrupt hedge funds.

This is not financial advice, I own GME and like the stock.


Popular posts from this blog

Crypto Market Update 2

Puerto Rico, Taxes, and a Bitcoin Utopia

HandCash - Bitcoin Wallet App Interview