Is wsb market manipulation

ByJoseph S. Hsu

March 24, 2021

GameStop’s (GME) stock price exhibited a drastic surge earlier this year, but it has not been the only number that has increased exponentially. The main-stream news coverage of WallStreetBets (WSB), the Reddit group credited as the catalyst for GME stock’s sudden growth, not only led to an increase in the number of users visiting the group’s page, also known as a subreddit, but also an increase in visitors of other investing-related subreddits. Figure 1 shows the follower count in the last six months of subreddits WSB, investing, and pennystocks.

Image created by Joseph S. Hsu. Data taken from

Corresponding with the rise in GME stock price in mid-January, the subreddits displayed an influx of growth as more people began to be curious about the world of investing. Most people flocked to WSB to get the latest news on GME, but those looking to learn more about other stock-related information discovered other smaller communities filled with knowledge to immerse themselves in.

Newcomers must learn new vocabulary to have a better grasp of the subject and involve themselves in the community. In addition to traditional investing vocabulary, such as portfolio and capital gains, terms such as “tendies” and “to the moon” have become popular in the WSB subreddit. While the previously mentioned terms are circulated often, a phrase that gives cause for concern has recently begun to circulate.

Market Manipulation

Market manipulation is identified by the US Securities and Exchange Commission (SEC) as “intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting the price of [stocks] or intentional interference with the free forces of supply and demand.”[i] The act of market manipulation is usually done with the intent to drive a stock’s price up or down.

According to a document written by Tom Swiers, an employee at the Office of International Affairs SEC, “pump and dumps” and trading manipulations are the two main methods of market manipulation.[ii]

With the “pump and dump” strategy, individuals, or groups of individuals, purchase a considerable amount of ownership of a certain stock. They then promote the stock to the public to generate an interest in purchasing said stock. Due to the increased demand, the stock’s price goes up, and the individuals that had previously purchased large amounts of the stock sell at the perceived peak and pocket the difference. The investors that have been tricked are then left with a stock that’s priced higher than its worth because of the artificial interest. After the initial exposure dies down, the stock price dips, and the investors are left with a loss.

The method of trading manipulations also aims to fool investors by tricking them into thinking a certain stock has high trading activity. Manipulators will buy and sell large amounts of stocks at the same time, also called a wash trade, essentially selling the stock to themselves. Wash trading increases the trading volume, or the number of shares traded over a period of time, and gives the impression to the public that a stock is more valuable than its worth.[iii] After the price of the manipulated stock reaches a satisfactory amount, the manipulators sell all their shares and profit off their fraud. Similar to stocks that have been “pumped and dumped,” investors are then left with a stock with declining value.

Two prominent cases of market manipulation in recent history include the Enron and WorldCom scandals.

The Fall of Enron

Prior to declaring bankruptcy in late 2001, Enron Corporation (ENE) was one of the stock market’s most beloved companies. Between 1996 and 2001, ENE was hailed as “America’s Most Innovative Company.”[iv] Its revenues beat out similarly sized companies by a landslide in 2000, and ENE was ready to position itself as one of the powerhouse companies in the USA.

As ENE continued to grow, it looked to spread into markets aside from the energy sector. In the early 2000s, the company attempted to enter into the budding video-on-demand market with Blockbuster, but after the venture failed to meet expectations of profits, Jeffrey Skilling, the CEO of ENE in early 2001, began to look at crippling losses.

In order to hide the losses from the public, Skilling manipulated accounting methods to write off unprofitable activities without hurting the company’s financial data. 3 By burying the company’s losses, Skilling was able to deceive the public into thinking ENE was more profitable than it really was.

Image taken from

The “Enron Share Price, Jan 2000-Dec 2002” graph shows the trend of ENE stock price from January 2000 to November 2002. Looking at the trend of ENE’s stock price from the early 2000s, the effectiveness of Skilling’s efforts in hiding the company’s losses becomes clear. In less than 12 months, the price of a single share of ENE’s stock rose by nearly double its amount from the beginning of the year.

Eventually, the losses were too much for Skilling, and after his resignation and other questionable business decisions, the SEC launched an investigation into ENE’s financials and discovered the fraud that they had committed. Criminal charges, the plummeting of stock price, and bankruptcy ensued as the truth became known to the public.

Enron Corporation went out of business in December of 2001, and although once loved, its name has now become “synonymous with corporate fraud and corruption.”[v]

WorldCom’s Folly

Similar to Enron, WorldCom was a quickly growing business in the early 2000s. Once the second-largest long-distance telecommunications company in the United States, WorldCom quickly went bankrupt after news came out about their attempts at fraud.

By manipulating how they categorized certain expenses, WorldCom was able to overstate its earnings by over $3.8 billion. Arthur Andersen, the same accounting firm that used to be in charge of Enron’s auditing, had not caught the mistake during their quarterly audit. After the initial news about the earnings overstatement came out, WorldCom also announced that they had manipulated some of their business accounts, resulting in another illegal movement of $3.8 billion.[vi]

Prior to the news of fraud, WorldCom’s stock had risen from around $25 per share in 1998 to nearly $65 a share in mid-1999. Much like the fallout of Enron’s scandal, the price of a single share of WorldCom’s stock fell to less than $2 per share, and the company filed for bankruptcy in early 2002.

So, how does this apply to WallStreetBets and GameStop?

Accusations Against WallStreetBets

In late January, GME’s stock price rose by over 2000% to hit a price per share of almost $350. Prior to the spike, the stock had been trading for less than $20 a share. This event caused an investigation to find out why the price rose so high, and news outlets fell upon Reddit user DeepF*ckingValue (censored and abbreviated as DFV) and his involvement with subreddit WallStreetBets (WSB).

Characterized by substantial gains or massive losses, WSB is a forum where people can post their research on certain stocks. DFV posted his first investments into GME in the WSB subreddit in May 2020.[vii] He later released a 56-minute video detailing his research into GME on his YouTube channel, Roaring Kitty. Initially met with criticism, it wasn’t until early January of 2021, right before the GME peak of $350 per share, that WSB users began to consider DFV a genius.[viii] Droves of people began to invest in GME with the hopes of riding the wave as the stock continued to grow.

However, not everyone has been so keen on DFV and the growth of WSB. In a letter written to the SEC, Elizabeth Warren, a United States Senator, stated her concerns about the movement of GameStop stock as being casino-like and that it interfered with the “fair, orderly, and efficient function of the market.”[ix] Since the initial rise in stock price, greater amounts of people have posted their analysis onto WSB and stated why they’re investing in GME. Once filled with research about a variety of different types of stocks, GME quickly became the main topic of the group.

To the typical bystander, DFV’s analysis and posts made by others on why they’re buying GME may seem like a “pump and dump” strategy. Wouldn’t an individual purchasing large amounts of stock and then promoting said stock warrant an investigation by the SEC? By looking at the legal definition of market manipulation and analyzing the reasons why DFV began investing in GME, the answer to the question of whether or not an SEC investigation is warranted becomes clear.

DFV and WSB’s Involvement in GME

In a congress hearing unrelated to the accusations of market manipulation on the part of WSB, DFV (aka Keith Gill) was told to testify of his involvement with GME. He states that he “did not solicit anyone to buy or sell the stock for [his] own profit,” he had not associated himself with a “group trying to create movements in the stock price,” and that he had “no information about GameStop except what was public.”[x] All of his research was documented and shared publicly, and it was up to the public to make a choice on whether or not they wanted to invest or refrain from investing with him. Despite the increase in stock price, he chooses to continue to invest money into it because, in his own words, “I like the stock.”9

Research posts made by others regarding GME also reflected similar sentiments. Most posts are accompanied by “I am not a financial advisor”[xi] or “this is not financial advice.” [xii] The point of spreading the word about GME was not to attempt to manipulate the market and intentionally inflate the price of the stock. The movement merely started as people sharing their research and opinions, and the substantial growth in GME price was just a byproduct of those actions.


WallStreetBets, and its members, were and always will be a community of investors doing their own research and sharing their own opinions. Some people will earn large sums of money, while some may also lose large sums of money. Not every stock discussed in WSB will skyrocket like GME. The stock market is unpredictable and constantly fluctuating. The only thing investors can do is perform their own due diligence in researching what they have an interest in and make their investments wisely.


[i] Swiers, Tom. “Market Manipulation and Case Studies.”, US Securities and Exchange Commission,

[ii] Ibid.

[iii] “Wash Trades – Definition of a Wash Trade – Cme Group.” CME Group. Accessed March 22, 2021.

[iv] Segal, Troy. “Enron Scandal: The Fall of a Wall Street Darling.” Investopedia, Investopedia, 21 Jan. 2021,

[v] “Enron Files For Bankruptcy.” A&E Television Networks, November 24, 2009.

[vi] Lyke, Bob, and Mark Jickling. “WorldCom: The Accounting Scandal.”, Congressional Research Service, 29 Aug. 2002,

[vii] Gill, Keith (u/DeepF**ckingValue). “GME YOLO month-end update – May 2020.” Reddit, May. 2020.

[viii] Gill, Keith (u/DeepF**ckingValue). “GME YOLO update – Jan 13 2021.” Reddit, Jan. 2021.

[ix] Dillard, Jarrell. “Elizabeth Warren Demands SEC Address Market Manipulation, GameStop Surge.” Bloomberg.Com, Jan. 2021, p. N.PAG. EBSCOhost,

[x] “Testimony of Keith Patrick Gill Before the US House Committee on Financial Services.”, 18 Feb. 2021,

[xi] The_f**cking_doctor (u/the_f**cking_doctor). “GME: Poker, cannibalism, and why the apes are going to win this hand.” Reddit, Mar. 2021.

[xii] KitrosReddit (u/KitrosReddit). “If Gamestop hits 800 before 2/26 we will trigger the Mother of All Short Squeezes, read up.” Reddit, Feb. 2021.

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