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SEC takes action against two meme traders

With the severe volatility in crypto markets, people devise new ways to gain extra advantages and circumvent traditional regulations. However, the concerned authorities (SEC), in most cases, discover the wrongdoers.

The United States Securities and Exchange Commission (SEC) has filed a complaint against two Robinhood users. According to the complaint, defendants Suyun Gu and Yong Lee took advantage of different trading fees schedules to extract arbitrage while wash-trading.

Wash trading is the malpractice of buying and selling a particular share simultaneously from different brokers to create artificial activity. Moreover, this makes the stock more desirable than it is.

According to SEC, they generated more than $1.5 million worth of rebates in total through the alleged wash-trading scheme. Moreover, they kept nearly half of the rebates as profits. In fact, SEC states that they profited $668,671 & $51,334 respectively.

Moreover, they wash-traded during February through April of this year. Also, the pair executed 11,400 and 2,300 trades through the scheme, respectively.

The pair faces accusations of targeting options contacts for popular meme stocks, including GameStop (GME) and AMC Entertainment (AMC). According to the complaint:

“Gu and Lee Believe that other marker participants’ interest in buying ‘meme stocks’ and related price increase would make put options on those stocks less attractive, making it easier for Gu and Lee to trade with themselves.”

In the court documents, the trading venues were not explicitly stated. However, many expect that the pair performed this malpractice through the fee-free app Robinhood. Moreover, the documents states that Gu concocted the scheme after watching the CEO from “Broker-dealer B” outline in a February court testimony.

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