The U.S. Department of Justice has made waves in the meme stock community as they have increasingly begun to investigate large hedge funds and financial institutions. The irregular trading patterns of stocks are finally seeming to draw attention to these large hedge funds. This is something the AMC and GME stock community has been long awaiting. As reported earlier in the week, the DOJ has recently probed Citron Research (LINK)  and went as far as confiscating personal devices of founder Andrew Left for further investigation. This gives hope that if any possible illegal trading activities have occurred, such as spoofing and scalping, that they may come to light. 

DOJ and SEC open investigations

Currently it’s reported that 30 short-selling firms are under fire by U.S officials. As the saying goes “when it rains, it pours”. For retail investors these investigations have been a long time coming, as the “Ape community” has speculated misconduct for a long time.  It’s reported that U.S authorities are also investigating firms such as Goldman Sachs and Morgan Stanley. Billionaire and CEO of Tesla Elon Musk reportedly emailed CNBC a statement regarding the recent probes, 

“I am greatly encouraged by the Justice Department investigating short sellers, This is something the SEC should have done, but, curiously, did not. Too often, sophisticated hedge funds have used short selling and complex derivatives to take advantage of small investors. They will short a company, conduct a negative publicity campaign to drive the stock price down temporarily and cash out, then do it all over again many times. The term for this, as you may be aware, is ‘short & distort,’”. 

What does this mean for AMC?

The retail investors of the meme stock AMC Entertainment have been endlessly discussing the possibility of illegal trading activity on the stock, such as “Naked shorting” — which is defined by Investopedia as the “illegal practice of short selling share that have not been affirmatively determined to exist” and “Dark Pools”, which is defined “private exchanges for trading stocks that is not accessible by the investing public”. If it is in fact true that the hedge funds have been participating in illegal trading activity, it could mean that the AMC stock price has been negatively affected because of this. However, while investigations have been initiated and this could mean that AMC stock holders are on the horizon of unveiling something big, it’s important to note, that these probes and investigations do not mean any charges have been formally filed. 

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