E-Trade May Remove “Roaring Kitty” From Platform Over GameStop Spike

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E-Trade, the online brokerage platform, is in a quandary over whether to remove Keith Gill, famously known as “Roaring Kitty,” from its platform. The move stems from concerns about potential stock manipulation, especially after Gill’s recent actions sent GameStop (GME) shares soaring.

Gill’s Influence on the Market

Keith Gill is no stranger to the spotlight. He was a renowned figure in the 2021 meme stock rally and GameStop short squeeze. On May 13, he resumed posting on X after a three-year hiatus, triggering a surge in meme stocks and coins. Weeks later, on June 2, he posted on Reddit, revealing that he held $181.4 million in GameStop stock and call options, betting on GME reaching at least $20 per share by June 21.

Gill’s Reddit post had an immediate impact. GameStop shares rallied over 19% on Sunday night trading and closed up 21% at $28 on June 3, before climbing another 8.5% in after-hours trading to $30.36. The stock is currently trading around $28.

This year alone, GME has surged nearly 68%, with over 60% of that gain occurring since Gill’s return to X. On June 3, Gill shared another post on Reddit, showing a $33.6 million gain on his 5 million GameStop shares and a $51.8 million gain on his options.

Concerns Over Manipulation of GameStop

This sequence of events has raised eyebrows at ETrade and its parent company, Morgan Stanley. According to sources cited by The Wall Street Journal on June 3, the firms are worried that Gill could leverage his influence to artificially inflate the stock price of GameStop for personal gain.

They are scrutinizing whether his posts on X and Reddit could be deemed manipulative. The dilemma is further complicated by the potential backlash if they decide to remove him, as it might prompt other users to close their E*Trade accounts in protest. As of now, no final decision has been made, and the firms might opt to take no action.

Regulatory Scrutiny

Meanwhile, Gill’s activities have not gone unnoticed by regulators. He holds several securities-industry licenses and was previously a registered broker with Massachusetts Mutual Life Insurance. The Massachusetts Securities Division is currently investigating his actions. Additionally, sources indicate that the Securities and Exchange Commission (SEC) is also reviewing GME call options trades around the time of Gill’s posts on X.

The SEC has reportedly discussed internally whether these trades could be classified as manipulation, though it remains unclear if there is a specific probe targeting Gill.

The situation highlights the complexities of regulating influential traders in the age of social media. As E*Trade and Morgan Stanley deliberate on their next steps, the broader market watches closely, aware that their decision could set a trajectory for meme stocks and crypto tokens.

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