The former employer of “RoaringKitty,” the online trader who helped spark off a Reddit-fuelled short squeeze on hedge funds betting against Gamestop stock, has agreed to shell out a $US4 ($5) million fine.
Keith Gill, who went by RoaringKitty on YouTube and DeepFuckingValue on Reddit, was a registered securities broker who worked as a financial wellness education director at insurer Massachusetts Mutual Life Insurance Company (MassMutual) when he began promoting ailing video game retailer GameStop as a surefire rebound bet in mid-2019. Eventually, he became one of the central personalities in a coordinated run against hedge funds that had taken short positions on GameStop (like Citron Capital and Melvin Capital) that was organised on Reddit’s r/WallStreetBets board in January 2021.
The subreddit /rWallStreetBets sent Gamestop stock skyrocketing, caused huge losses for some vampiric hedge funds that had been shorting the company, shook markets enough that Congress held (useless) hearings, and made Gill a hefty chunk of wealth. The short squeeze also kicked off a wave of speculation in other “meme stocks” like AMC, causing major problems for stock-trading app Robinhood, which alienated a large number of its users by halting trades in some of the affected stocks.
The New York Times reported on Thursday that MassMutual has reached an agreement to pay a $US4 ($5) million fine to resolve Massachusetts securities regulators’ claims that the company didn’t do enough to supervise Gill and his colleagues’ trades and doings online. Additionally, the state regulators claimed Gill carried out trades for three people with no connection to MassMutual without obtaining company permission. The Times wrote that the settlement reached between MassMutual and the state contains no admissions of wrongdoing but does include other additional measures, such as a compliance review and audits.
MassMutual had previously said that if it had been aware of Gill’s online activities, it would have asked him to cease them or even simply fired him. He was technically employed at the company through Jan. 28, when the GameStop fiasco was still running its course; as Gill was a licensed professional, he had obligations to notify his employer of outside activities. MassMutual was similarly obligated to monitor for any undisclosed activity by its staff, and financial firms generally aren’t supposed to allow their analysts to go around promoting various stocks when they’re not on the clock.
The investigation was originally opened by the office of Massachusetts Secretary of the Commonwealth William F. Galvin. According to the Wall Street Journal, Galvin says state regulators concluded MassMutual didn’t have “reasonable policies and procedures in place to detect and monitor” any moonlighting workers.
The Times wrote that other parts of the settlement detail how Gill conducted 1,700 trades for three other people in a manner that went against state regulations. While MassMutual denied permission for Gill to manage one of those individuals’ accounts, it didn’t catch on to the other two. Galvin’s office determined that the insurer had third-party software that should have alerted it to trades of more than $US250,000 ($343,050) in a single security, the Journal reported, but the feature in question was turned off. Beyond that, regulators were not happy that MassMutual failed to become aware of Gill’s prolific online alter ago at any point. According to the Boston Globe, that included over 250 hours of YouTube videos with stock tips, 590 tweets related to securities, and his Reddit account.
A spokeswoman for MassMutual told the Times the company “is pleased to put this matter behind us, avoiding the expense and distraction associated with protracted litigation.”
“As far as MassMutual is concerned they were obviously totally at fault for not supervising him,” Galvin told the paper. “I mean, it was beyond a small matter of negligence. It was complete and thorough.”