U.S. SEC charges individuals in ‘meme stock’ options trading scheme
The U.S. Securities and Trade Fee headquarters in Washington, D.C., U.S. REUTERS/Andrew Kelly
WASHINGTON/NEW YORK, Sept 27 (Reuters) – The U.S. Securities and Trade Fee on Monday charged two people for a fraudulent buying and selling scheme involving so-called “meme shares” aimed toward benefiting from a surge in retail buying and selling pushed by social media in early 2021.
The securities regulator stated it charged a Florida resident and his good friend for allegedly utilizing a type of market manipulation known as wash buying and selling to gather rebate funds from exchanges as retail merchants piled into “meme shares” – shares being actively promoted on social media.
The SEC stated Suyun Gu devised a scheme to illegally revenue off of so-called “maker-taker” pricing supplied by exchanges, during which resting orders that present liquidity by executing towards different orders obtain a rebate cost, by buying and selling choices contracts with himself utilizing numerous brokers.
“Along with amassing these ill-gotten rebates, the wash-trading scheme allegedly impacted the market because it skewed the amount in sure possibility contracts and induced different merchants to position trades in in any other case illiquid possibility contracts,” the SEC stated.
Gu executed round 11,400 trades with himself, netting greater than $668,000 in rebates, whereas his good friend, Yong Lee, executed round 2,300 trades with himself, netting greater than $50,000 in rebates, the SEC stated.
Gu and Lee selected put choices on meme shares that had been far out of the cash, which means the strike value was effectively under the underlying inventory value, to commerce towards themselves as a result of retail curiosity in these shares was sending the costs larger, making put choices much less engaging, the regulator stated.
In March, two brokers closed Gu’s and Lee’s accounts over wash-trading considerations however Gu continued the scheme by mid-April by mendacity about his buying and selling technique, utilizing accounts in different peoples names and accessing accounts by digital personal networks to cover his exercise, the SEC stated.
Attorneys for the people didn’t reply instantly to request for remark.
Reporting by Chris Prentice and Katanga Johnson in Washington and John McCrank in New York; Enhancing by Mark Porter
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