Economy

Melvin Capital lost 53% in January, hurt by GameStop, other bets

Melvin Capital lost 53% in January, hurt by GameStop, other bets”

Investors on the social media news site Reddit collectively caused hedge fund, Melvin Capital, to lose billions of dollars, while at the same time suddenly boosting the price of shares in GameStop, a video game retailer.

The CIDs were sent to Discord, Robinhood Financial, Robinhood Markets, Robinhood Securities, Interactive Brokers, TD Ameritrade, TD Bank, E-Trade, WeBull Financial, Public Holdings, M1 Holdings, Citadel Financial, and Apex Clearing Corporation, Paxton's office said in a statement. "That's why we need an SEC investigation".

In a class action lawsuit filed in the Southern District of NY, a group of retail investors alleges Robinhood manipulated the market by removing GameStop from its trading platform and deprived retail investors of potential gains.

Due to the frenzy surrounding it, United Kingdom authorities warned investors to make sure they were fully aware of the laws surrounding "market manipulation" and the risks of investing in such a volatile market.

Robinhood restricted trading on 23 stocks initially, but expanded the list to 50 later on Friday.

By raising margin requirements for trading in those securities they were implicitly also protecting themselves.

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"The Commission will closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities". "Their focus is on protecting retail investors and also the integrity of the market".

Speaking to Sky News, the 58-year-old said it was nice to see the little guy win for a change.

As a result, the incident led to a massive backlash on social media as move appeared as market manipulation by certain large hedge funds to minimise their losses and keep others out.

The Reddit group specifically targeted stocks that were heavily shorted.

Hedge funds: Hedge funds are alternative funds or investments employed by investors that aims to profit over investment by short-selling on failing stocks. "They may withdraw their services, in line with customer terms and conditions if, for instance, they consider it necessary or prudent to do so".

The UK FCA (Financial Conduct Authority) likewise issued a statement warning investors of the heightened risks of buying shares in volatile markets.



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