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Federal Prosecutors Open Investigation into GameStop Short Squeeze Trading

The Wall Street Journal reported yesterday that the Justice Department and the U.S. Attorneys' Office in San Francisco have opened investigations into a surge in trading relating to GameStop and other securities.

As I wrote in an earlier post, proving market manipulation will be a difficult task for prosecutors.

Coordinated trading in securities only becomes criminal when traders take affirmative steps to create an artificial price, such as planting false information in news stories or distributing large volumes of messages with misleading information that the traders hope will push prices in one direction or another.

A variety of Congressional committees also hope to get into the spotlight, holding hearings on the recent increase in trading activity.

Federal prosecutors are investigating whether market manipulation or other types of criminal misconduct fueled the rapid rise last month in prices of stocks such as GameStop Corp. and AMC Entertainment Holdings Inc., according to people familiar with the matter.


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