US SEC Files A Complaint Against Two Meme Stock Wash Traders

The SEC (Securities-and-Exchange-Commission) of the United States has registered a complaint alleging two Robinhood consumers of being involved in wash-trading through an arbitrage scheme utilizing meme stocks. As per a complaint of 27th September, the accused Yong-Lee and Suyun Gu took benefit of divergent schedules of trading fees provided by different exchanges and retail brokers to excerpt arbitrage through wash-trading. By making trade between the market makers (venues providing rebates) and market takers (venues not charging any fees), it has been estimated by the SEC that the defendants made across $1.5 million cumulatively by rebates through the accused wash-trading scheme.

It is considered that Lee and Gu have been capable of keeping approximately half of commission and rebates calculating up to $51,334 and $668,671, respectively, through wash-trading ranging between February and April of the current year. It is believed that they completed 2,300 and 11,400 trades in the respective scheme. The defendants are alleged to have aimed at put-options links regarding prominent meme stocks such as AMC (AMC Entertainment) and GME (GameStop), as per the complaint.

The accused thought that the price increase, as well as the interest of other participants in meme stocks, would make them careless about the put options on the respective stocks, making it convenient for Lee and Gu to make trade among themselves. Although the venues utilized by the alleged are not openly mentioned in the documents of court, it seems that the suspects were operating on Robinhood (a prominent investment application charging no fees).

The documents further mention that the accused “Gu” fabricated the scheme after having watched the outline given by the CEO of “Broker-dealer B” during court testimony in February, noting that there are no taker fees are charged by the company thereof over its customers. During the very month, Vlad Tenev (the CEO of Robinhood) took oath in front of congress about the market volatility regarding GME as well as the rest of such meme stocks. The widely famous Gametop and AMC meme stocks come to be so due to the pump-and-dump group named “r/wallstreetbets saga” being based on Reddit and Robinhood during the initial phase of this year.

Robinhood got entangled in controversy during January following its blockage of trade over GME in the infamous short squeeze for hedge funds being led by a Reddit group r/wallstreetbets. The response of the group was instantly provided through converging on the cryptocurrency as Dogecoin was pumped by almost 980% on 28th January, the very day when Robinhood proceeded to reduce the speculation of meme stock.

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