The investigation will revolve around who is responsible for the "pump up" and cheerleading. Keith P. Gill, AKA "Roaring Kitty" and "DeepFuckingValue," the most visible cheerleader, is a financial advisor/analyst from Massachusetts who may have broken some rules by providing personal investment advice and stock recommendations using social media. He's not a normal Joe, mom&pop investor placing a bet. It's possible he broke the rules by creating a virtual "boiler-room" using social media. And even if he were a regular Joe, it's still not legal to offer investment advice using an public means of dissemination without following proper protocol.

Many like the idea of a little guy getting one over on the big guys and fat cats. But then there's valuation and then... there's valuation.

When the short selling hedge funds came in to short, they targeted a relatively poorly manage company whose financials and outlook justified selling it. When Roaring Kitty and the merry band of Redditors on WSB decided to buy it they did so betting that they could raise the price well above the threshold that the shorts paid for it causing a short cover(buy back of the borrowed stock). Sure, they sprinkled in a little fanciful notions that it could help GME as a company and that GME has a viable future. But there was no serious fundamental analysis in that regard. I mean, the insiders were selling stock to the tune of hundreds of thousands of shares in Nov and/or Dec. The play and intent was to get an explosive short cover rally on a stock that had a %short to float ratio of 140%.

All of that is perfectly legal for every TD Ameritrade, E-Trade, IB, Robinhood, et al customer to buy into.

The grey area of legality comes in with regards to those who initially gave the advice to do this. There's a protocol to follow when publicly advising on what stock or investment to buy or sell. If any of those rules were broken by the initial persons who recommended these buys, then there will be legal consequences for them.

The next level of consequence could come with making it illegal to use social media to informally and publicly recommend investments without the proper protocol. (You know the proviso at the end of a prospectus, "past result are no guarantee of future profits" or some such).

Does the government/regulators need to protect the public? I say maybe. Many do not understand how the markets work. There are all sorts of incorrect statements being made on social media about market mechanics and strategies and how the PDT rules work. But the one thing they do understand is profit and loss. The real problem is when the little guy gets hurt through his own doing (ignorance), he cries foul. Politicians look at that as an opportunity to impose legislation (arguably good or bad). There is increased talk of instituting a Financial Transaction Tax to tamp down on speculation. Something many little guys who know very little about the markets are attracted to thinking it will stick it to the big guys but which will hurt they themselves in the process.

I remember the days of SEOS banditry and the subsequent PDT rule in 2001 that was partly a consequence of the little guys dreaming to be like the SOES bandits and getting one over on the big guys (market makers).

Yeah, They broke the banks but did the little guy really break the rules? The banks were in excess of 100% short, they touted their shorts on squawk boxes and live streams and told everyone why they needed to be short while already in their positions. The reddit guys touted Game Stop on their sub-Reddit, told everyone why they need to be long and won.. Were the rules really broken?

Sorry, but I don't agree with you. I've been a regular lurker on WSB for quite awhile, and I can tell you no investment advice was being given out by DFV. It's all there in his post history. Nothing from Roaring Kitty comes to mind so I can't speak on him. What I can tell you is that when DFV posted his positions last year he was widely lambasted on the subreddit. The consensus was that it was a pretty stupid trade and he was mocked for it and then forgotten about. Only in the last month did interest in GME pick up on the sub and someone remembered he had put on a pretty large bet. He wasn't giving out investment advice or recommending people to buy or sell any securities. He laid out his thesis and posted his position, that's it. His cost basis is so low because he was so early in the trade. He's been holding his call options and stock for many many months. There was no coordinated pump. He got lucky. That sub is pure chaos and the mob picked up the torch of "fighting the hedge funds" once the stock started to pick up.

The fact of the matter is the smart guys on the street made huge bets that blew up in their faces. That's normal and fine. Happens all the time on Wall Street. The part that they can't wrap their heads around is who handed them the loss. Retail never wins, so instead of everyone admitting that these guys got lucky on a 1 in a million shot, everyone is looking around to see how the "system" must have screwed up.

Wait just a minute....when my measly account is overextended, I get that “margin call” notification. What about the hedge funds who are the Market Makers for Robinhood? They are not Bookies!

Citron announces it has discontinued short selling research to focus on long opportunities only. The world is upside down.

In case you don't know Silver is also concerned and we can see the results on the future price since yesterday. I was participating before and continue doing so
#silvershortsqueeze
https://www.reddit.com/r/wallstreetbets/comments/l6novm/the_real_dd_on_slv_the_worlds_biggest_short/

I am not sure of the exact timing but there is an excellent chance Robinhood was actually in violation for a short period

People should read this again. I know it contradicts all the conspiracy theories that people would like to believe but it explains what happened. Broker/Dealers have capital requirements. RH was in danger of breaking there's. Hence they suspended trading in the issues causing the problem and raised additional capital. Now its no longer an issue they have reopened trading.

Saying all that though if I was this guy I would be very upset. But it looks like he was buying on margin, and things liket his happen when you do that.

I'm old enough to remember when amazon.com was overvalued at about $130 . Just saying.

Valuation is in the eye of the beholder.

Or, perhaps the SEC could set up a division of Valuation Enforcement to ensure the market price does not go over, say, a P/E multiple of 25? We can discuss which metric would be most appropriate.