Reading about how YouTubers and Redditors with screennames liike "RoaringKitty" and "DeepF*ckingValue" contributed to last week's financial mania with posts and videos expounding the virtues of GME, AMC, BBY, BBBY, NOK, KOSS and the other "Wall Street Bets" stocks has been a big part of the drama in the aftermath of last week's trading chaos.
For the last week, a parade of financial analysts, academics, regulators and bankers have warned that the capital markets sickness that sent GME shares to nearly $400 can be blamed on a handful of rogue charlatans hawking an absurd "stick it to the man" narrative on social media (and not the hedge funds trying to short GME into oblivion with naked short positions so large, they amounted to more than 100% of GME's float before the explosion).
With Janet Yellen and the rest of the top financial markets regulators in the country meeting on Thursday, we learned last night via the New York Times, and via an interview with House Financial Services Committee Chairwoman Maxine Waters, that a key player in the Feb. 18 House committee hearing/media circus will be Keith Gill, the former MassMutual employee known alternatively on Reddit and YouTube as "DeepF*ckingValue" and "RoaringKitty".
As we've reported, Gill seemingly minted millions of dollars trading GME and other stocks, at one point displaying a screenshot of a brokerage account balance with almost $50MM in it. While that number appears to have declined substantially in the ensuing selloff, more recent screenshots suggest Gill has amassed quite a substantial fortune from his trading, just like another former scapegoat we can think of.
Of course, small-time traders like Gill aren't the only ones who profited from the chaos, and while Tenev and other witnesses will be appearing in a professional capacity, Gill is being painted as some kind of financial terrorist, and it's already becoming clear that - just like regulators did with Nat Sarao after the May 2010 "flash crash" - they will once again find a small-time trader to scapegoat, regardless of whether their actions actually had a major impact on the market volatility in question.
But not only is Gill being dragged in front of the Committee (though Waters couldn't say whether he was "confirmed", only that she was trying to "get" him for the hearing), but regulators in Massachusetts are taking aim at him, and it looks like they have found an excuse to punish and scapegoat Gill, due to the fact that, technically, he was still employed by a major insurance firm, and was a registered securities broker, while carrying on his anonymous social media persona and pitching stocks online. Some might construe that as a conflict, and regulators are reportedly - according to the NYT - putting pressure on both Gill and his former employer, MassMutual, one of the biggest financial services firms in the state of Massachusetts.
MassMutual has reportedly told regulators that it was unaware of Gill's extracurricular social media activity. Nevertheless, according to federal regulations, the firm is responsible for monitoring the activity of its employees.
Here's more from the NYT:
Moonlighting under the name Roaring Kitty, Keith Gill became something of an online folk hero for his dedication to GameStop, the struggling video-game retailer at the center of a trading frenzy that sent its share price into the stratosphere.
But now a regulator in Massachusetts wants to know more about Mr. Gill, a registered securities broker, and his former day job as a financial wellness education director at an insurance company based in Boston.
Inspired in part by Mr. Gill’s cheerleading, thousands of small investors pushed stock in GameStop to as high as $483 a share and made Mr. Gill fabulously rich on paper. A picture he posted last week on the Reddit WallStreetBets forum showed his GameStop investment was worth $48 million, though his actual returns could not be independently verified.
But Mr. Gill’s former employer, MassMutual, has told securities regulators in Massachusetts that it was unaware that Mr. Gill had spent more than a year posting about GameStop on social media, online message boards and YouTube. The insurer also told regulators that had it known about Mr. Gill’s outside activities, it would have asked him to stop or possibly fired him.
William Galvin, the Massachusetts secretary of the commonwealth, has already sent letters to MassMutual asking to learn more about Gill's employment at MM, where he reportedly served as a "financial wellness education director," a position that required him to be a licensed broker. Though Gill reportedly put in his notice on Jan. 21, he was still technically an employee of the firm. And this apparently opens him up to liability for breaking rules set by his employer, or any regulations or laws.
In a statement to the NYT, Galvin said: "I am not trying to inhibit anyone’s ability to access the marketplace,...the issue here is transparency."
On Friday, Mr. Galvin’s office sent a letter to MassMutual’s general counsel seeking information about Mr. Gill’s employment status and whether the company was aware of his outside activities promoting GameStop.
The letter also sought details about the firm’s “process for identifying undisclosed business activities” and for monitoring an employee’s use of social media.
Debra O’Malley, a spokeswoman for Mr. Galvin’s office, said much of MassMutual’s response was confidential because the inquiry is open. But she confirmed the date of Mr. Gill’s departure and reiterated the company’s contention that it was unaware of his activities.
Ms. O’Malley said MassMutual had told securities regulators that it previously denied a request by Mr. Gill to perform side work managing an investment portfolio for a family friend after he joined the company in April 2019.
Paula Tremblay, a MassMutual spokeswoman, said in an emailed statement that Mr. Gill was no longer employed by the company and that the matter was under review. She declined to comment further.
An outside lawyer quoted by the NYT said that while it's too soon to say whether Gill may have violated securities laws, but it's certainly possible that he might have violated rules set by his former employer if he was posting without their knowledge, which it looks like he was.
Andrew Calamari, a lawyer with Finn Dixon & Herling and a former director of the Securities and Exchange Commission’s New York office, said it was too soon to determine whether Mr. Gill had violated any securities regulations. But Mr. Gill could have violated company rules if he did not receive permission for his posts on Reddit and YouTube.
“Firms don’t allow employees to go out and make predictions on stock,” he said of employees who aren’t analysts. Many financial firms also require employees to disclose if they have brokerage accounts with other firms to monitor their trading activities, he added.
But as we noted above, state regulators in Massachusetts might be the least of Gill's worries.
In an interview with Cheddar yesterday, House Financial Services Chairwoman Maxine Waters confirmed that Robinhood co-founder and CEO Vlad Tenev was on "her list" of prospective witnesses for the Feb. 18 hearing before the House Financial Services Committee, along with Gill, representatives from the hedge fund community, representatives from Reddit - even representatives from GameStop, whom Waters is inviting to essentially pitch their business model. Waters added that she wants "all the big boys here".
"I understand that they are working on turning it around and there is a real possibility that they could be successful at this, so I want them here, too. I want to know a little more about GameStop, I want Robinhood, I want Reddit and I want the big boys here."
As for the Redditor's "stick it to the man" narrative, and its consequences for financial stability, Waters said she's not taking sides. The Democrats are simply trying to bring all the parties to the table, and listen to what they have to say (albeit with a few aggressive "gotcha" questions, grist for reelection in just under 2 years).
We also can't help but wonder, if Waters is truly trying to gather all the parties involved, who else might be called to testify? Dave Portnoy? Chamath Palihapitiya? Steve Cohen?