Janet Yellen, US Treasury Secretary has called for a meeting of top financial regulators to discuss the recent market volatility owing to a massive price surge in GameStop(GME), AMC, and Silver courtesy of social media frenzy especially Reddit. Yellen would reportedly talk to the head of the SEC, CFTC, and the Federal Reserve, as per a report from Reuters.
Reports also suggest that Yellen took the advice of an ethics lawyer before calling for the meeting owing to her $700,000 paycheck she received in the recent past from Citadel LLC, a hedge fund that reportedly lent nearly $2.75 billion to Melvin Capital. Yellen reportedly received the said amount as a speaking fee from Citadel, something that has been called out by many.
Just maybe Janet Yellen taking $810k in speaking fees from Citadel might have something to do with the White House getting involved with @RobinhoodApp stopping the $GME buy. We thinks pic.twitter.com/aAIyKG5nEr
— Left Flank Veterans (@leftflankvets) January 28, 2021
Melvin Capital is the hedge fund that was at the receiving end of the recent short squeeze of GME, as they had bought a significant amount of short position against Gamestop. The hedge fund incurred heavy losses at one point going over their current valuation of near $13 billion before they closed their short position.
Reddit Frenzy Vs the US Financial Regulators
In what started as a war against wall street was soon brought to the attention of top US politicians including congresswoman Alexandria Ocasio Cortez, followed by the SEC CFTC and now the US treasury secretary after Nasdaq and Robinhood blocked the trade of these soaring stocks claiming trader protection. However, Robinhood’s chief investor also being a Melvin Capital investor didn’t help their case.
The Reddit frenzy to short squeeze hedge funds initiated by a group called wallstreetbets started towards the end of September and gained momentum in January post Elon Musk tweet that saw GME stock rise above $450. The same is true for AMC and to some extent Silver as well, however, the price of all the mentioned stocks started to tank yesterday where GME lost nearly 50% of its gains while AMC took a 20% beating followed by Silver which lost 10% of its market share.