Why Roaring Kitty Remains Immune to SEC Probe for Meme Stock Manipulations


Keith Gill, known online as “Roaring Kitty,” has again attracted attention for his involvement with GameStop Corp. (GME). This time, however, the focus is on the regulatory loopholes he’s reportedly using to his advantage. 

This has stirred debate among market experts and legal analysts as to why it seems unlikely that the SEC will investigate him.

Roaring Kitty – Influence on the Crypto Market

Daniel Hawke, former head of the SEC’s market abuse unit and a member of Arnold & Porter Kaye Scholer, clearly described Gill’s approach. According to him, Gill is just taking advantage of a rule gap.

This fact highlights the complexity of Gill’s actions, which, while controversial, appear to stay within the boundaries of the law. Gill has a powerful impact on retail investors. He uses his online presence to draw significant attention to GameStop, leading to increased trading activity.

However, unlike typical market manipulation schemes, Gill does not encourage investments in GameStop or make false claims about the company’s financial health.

His communications are often limited to cryptic memes and updates on his own trading positions. As Hawke pointed out, this approach makes it difficult for the SEC to accuse him of deceit, which is essential for any prosecution.

Moreover, Gill’s actions highlight a notable grey area in market regulations. While some observers accuse him of market manipulation, others argue that his behavior is similar to that of Wall Street fund managers who openly discuss their investments. 

This divergence of opinions highlights the tricky nature of his activities and the challenges they present to the SEC. 

The agency’s main challenge is determining whether Roaring Kitty’s trading activities and influence constitute deception. This is because existing regulations require evidence of deceit for a successful prosecution.

The situation shows the need for reassessing regulatory structures, which is necessary to keep pace with the evolving nature of such influences.

Keith Gill’s GameStop Position Undergoes Inspections

Meanwhile, according to his Reddit posts, Gill continues to hold a significant stake in GameStop, amounting to $557 million in shares and options contracts.

However, questions linger about the nature of his trading activities, including whether he has backing from other investors. There are also suspicions surrounding his funding sources for these substantial GameStop purchases.

The controversy deepened when prominent investor Ross Gerber warned Gill about the risks associated with his short-term holdings in GameStop. Gerber specifically pointed out Gill’s $115.7 million stake in the company, which includes a soon-to-expire call option of $65.7 million.

SEC Chair Gary Gensler also commented on the matter. He stressed that while disclosure is important, it doesn’t shield a bad actor from the consequences of breaking the law.

Meanwhile, the number of open GameStop contracts soared to 145,000 by the end of May, a stark increase from the 15,000 earlier in the month. Due to this rise, experts concluded that Gill might face difficulties in cashing out his GameStop options.

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