At a glance.
- Social media and the potential for market manipulation.
- Indictment in a case of disinformation designed to suppress 2016 voting.
Like investing in tulip bulbs, only with a big helping of Schadenfreude on the side.
A large swarm of individual investors, mobilized by influencers and motivated at least as much by lulz and resentment as by the usual fear and greed, have shown themselves able to move markets. Loosely organized around the Reddit forum WallStreetBets, individual investors drove shares of brick-and-mortar retailer GameStop very high, CNBC reports. It became a classic short squeeze as short-sellers, a lot of them hedge funds, had to cover their bets at a high price, taking large losses. GameStop shares traded at $42.59 last Friday (and that already represented a considerable gain); they'd reached $469.42 by 10:00 this morning (and have since fallen off, a bit).
A few other stocks, AMC among them, were also the subject of social media driven investment. In the case of GameStop, the Wall Street Journal thinks the episode indicates a power shift in the investment world, away from Wall Street and toward Main Street. “War has broken out between professionals losing billions and the individual investors jeering at them on social media,” as the Journal puts it. Social media have now joined passive and quantitative trading among the forces disrupting traditional markets.
Despite the dudgeon being expresses in many quarters, it's not clear that any laws have been broken. It's not insider trading, for example, which would be the first lay reaction to a surprising incident in the stock exchanges: the trading was transparent and based on public information. A great deal apparently hinges on whether the influencers urging investors on constituted a “group” under Securities and Exchange Commission guidelines. If they do, then they may have a problem. If they don’t, that is, if they’re simply people woofing public information at each other, then it’s hard to see what the legal problem might be. Observers expect a fair amount of lobbying of the new US Administration urging that this kind of behavior should be outlawed.
Other stocks have been spontaneously pumped in social media. The most recent such odd online stampede happened earlier this month. In one case, and this one was one case in which a similar name drove an unrelated stock's share price up. When concerns about the privacy of WhatsApp surfaced (and see this piece in WIRED for background), Elon Musk tweeted "use Signal,” that is, use another messaging app that’s unencumbered by Facebook. This tweet apparently caused the stock of a very surprised Signal Advance to pop into triple-unicorn territory. Signal itself is not a publicly traded company, but that didn’t deter enthusiasts from reading “use Signal” not as privacy advice, but as a stock pick, and apparently “Signal Advance” was close enough to "Signal" to draw a great deal of interest. That's simple error that hardly rises to the level of misinformation, still less disinformation, but it shows how sensitive financial markets are to tips passed over social media.
Alex Stamos, of the Stanford Internet Observatory, tweeted that the incident has implications that go beyond whatever market disruption might trouble Wall Street:
"The WallStreetBets manipulation of $GME is now the best template for how one could monetize an influence operation. I don't know if any laws were broken this time, but Reddit now has a problem: it is the home for a community of hundreds of thousands of people who have demonstrated the ability to move billions of dollars based upon the urging of, at most, a couple dozen anonymous accounts. Reddit has some thoughtful policy people thinking through these issues, but I'm not sure they have a dedicated influence-ops-focused investigation team like TWTR/FB. If they leave WSB up, they will need one."
As Stamos points out, he's not stooging for the hedge funds. "People are incorrectly reading this as a defense of hedge funds. It is not (tax their carried interest as W-2 income!) Who do you think is going to be messaging everybody with well-followed YouTube channels and lots of Reddit Gold to drive the next rally?"
Arrest made in apparent voter suppression scheme.
A man has been arrested in Florida on charges related to fraudulent attempts at voter suppression. One Douglass Mackey, sometimes going by the nom-d’influence “Ricky Vaughn,” an apparent homage to the Charlie Sheen “Wild Thing” character in the movie Major League, has been charged with conspiring to deny people the right to vote.
The alleged offenses actually occurred during the 2016 elections. (The campaign the indictment covers was described in 2016 by the Washington Post.) In that year Mr. Mackey had established a Twitter following of some fifty-eight-thousand, which is pretty good. The Department of Justice in its announcement helpfully benchmarks Mr. Mackey’s audience against other influencers, and says he did better than NBC News, Stephen Colbert, and Newt Gingrich.
Prosecutors say that between September and November of 2016 Mr. Mackey “conspired with others to use social media platforms, including Twitter, to disseminate fraudulent messages designed to encourage supporters of one of the presidential candidates” (simply called the “Candidate” in the release) to text their votes in. You can’t vote by text. The tweets identified themselves as associated with the “Candidate’s” campaign, but obviously, since they were designed to convince likely “Candidate” voters to think they’d voted when in fact they hadn’t, were not in the “Candidate’s” interest. NBC News identifies Mr. Mackey as a “pro-Trump internet troll,” and if they’re right, it would seem that “Candidate” would have been that other candidate, the one who wasn’t Donald Trump. If convicted of conspiracy, Mr. Mackey could see a sentence of ten years.