The stakes have been raised in the great GameStop stocks debacle as the US Justice Department has become involved. After the White House and Congress have weighed in on the recent situation, it now seems that federal investigators are becoming involved. Despite the overall situation having calmed down, the aftermath is still one that could have lots of consequences for both individuals and the stock market itself.
At the start of 2021, the stock for GameStop began to rise quite dramatically thanks to a short-squeeze. Going from a mere $20 a share to $40... and then all the way to the triple digits. The stock soared for about a week, largely thanks in part due to media attention and the help of prominent figures like the richest man in the world, Elon Musk. It didn't take much for the momentum on the stock to get going, but once it did, it became an event that will surely go down in history.
Sadly, all good things must come to an end. The stock eventually plummeted and is now down to about $50 a share, which is still overvalued but a drastic dip from what it had been riding at. Now, according to The Wall Street Journal, the US Justice Department is looking into the chaos by investigating social media companies (like Reddit) and brokerage apps like Robinhood, the company largely associated with tanking the GameStop stock by restricting trading on its app. Prosecutors have subpoenaed information from Robinhood but it's unclear what exactly they've obtained.
The US Justice Department is investigating whether or not there was any market manipulation, which would mean a coordinated effort to raise the stock. The Department will need to find very specific evidence of key individuals gathering together to actually artificially pump up the stock. Elon Musk did go silent regarding the stock shortly after tweeting "GameStonks", likely at the request of the people around him as to not attract legal attention. Musk is still rallying people behind various cryptocurrencies such as Dogecoin online.
There's been lots of speculation behind whether or not there will be any actual legitimate case for market manipulation. It's not illegal to share how much you like a stock. There's also plenty of shows, outlets, and individuals that analyze stocks and the general market as a career, it will likely just boil down to how individuals worded their posts and if there can be a case made that people did this intentionally. Whether or not this whole situation can save GameStop as a business remains to be seen.
Source: The Wall Street Journal