WASHINGTON / NEW YORK, Sept. 27 (Reuters) – The United States Securities and Exchange Commission on Monday indicted two individuals for a fraudulent business scheme involving “memes actions” aimed at profiting from a surge in retail trade induced by social media in early 2021.
The securities regulator said it indicted a Florida resident and his friend for allegedly using a form of market manipulation called ‘wash trading’ to collect repayments from the stock exchanges as retail traders crammed in. “memes actions” – actions that are actively promoted on social media.
The SEC said Suyun Gu devised a scheme to illegally profit from so-called “maker-taker” prices offered by exchanges, in which rest orders that provide liquidity by executing against other orders are given. a reimbursement, by negotiating options contracts with itself using various brokers.
“In addition to collecting these ill-gotten discounts, the wash-trading program would have had an impact on the market because it skewed the volume of some option contracts and prompted other traders to trade on option contracts. ‘otherwise illiquid option,’ the SEC said.
Gu executed around 11,400 trades with himself, earning over $ 668,000 in discounts, while his friend, Yong Lee, executed around 2,300 trades with himself, grossing over $ 50,000 in discounts, a indicated the SEC.
Gu and Lee chose put options on meme stocks that were far from the money, meaning the strike price was much lower than the price of the underlying stock, to trade against themselves because the interest of individuals in these stocks drove up prices, making put options less attractive. , said the regulator.
In March, two brokers closed Gu and Lee’s accounts due to “wash trading” issues, but Gu continued the scheme until mid-April by lying about his trading strategy, using accounts in the name. other people and accessing accounts through virtual private networks to hide its activity, the SEC said.
Lawyers for the individuals did not immediately respond to the request for comment.
Reporting by Chris Prentice and Katanga Johnson in Washington and John McCrank in New York; Editing by Mark Porter
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