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‘Roaring Kitty’ Sued for Securities Fraud over GameStop Rise

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Re: ‘Roaring Kitty’ Sued for Securities Fraud over GameStop Rise

#81

Post by perennate »

orliesaurus wrote: post #19

No way this is happening for real...he's suing /u/DeepFuckingValue because he took a loss trading? Then what's next? Suing your state's DoT every time you get a flat on the road?

I mean, frivolous lawsuits are nothing new: https://www.thebalancesmb.com/most-ridiculous-lawsuits-of-al...

They usually get tossed out pretty quickly.

"In 2016, an Illinois man sued Starbucks for misrepresenting the amount of liquid contained in its cold drinks. ... The judge agreed with Starbucks' argument that a reasonable consumer who orders an iced drink expects the drink to contain both liquid and ice."

Re: ‘Roaring Kitty’ Sued for Securities Fraud over GameStop Rise

#82

Post by munk-a »

Animats wrote: post #56
dilippkumar wrote: post #18

Earlier quoted context omitted.

> “Gill’s deceitful and manipulative conduct not only violated numerous industry regulations and rules, but also various securities laws by undermining the integrity of the market for GameStop shares,” the suit said. “He caused enormous losses not only to those who bought option contracts, but also to those who fell for Gill’s act and bought GameStop stock during the market frenzy at greatly inflated prices.” As a re…

Here are the rules for registered investment advisors.[1] This was a pump and dump. Those have been around since at least the 19th century. Older ones involved newspapers and newsletters. Newer ones involve social media. The SEC fines people for this regularly. This time, the suckers were people who hadn't seen this a few dozen times yet. [1] https://www.sec.gov/divisions/investment/iaregulation/memoia...

I don't think GME will end up being justly classified as a pump and dump scheme - for pump and dumps there needs to be both intent and ability and while there is surely both intent and ability in r/WSB I think an investigation will find that no one with the intent actually had the community presence to sway folks - that said, some rando in the community might end up taking the fall and being a scapegoat.

Re: ‘Roaring Kitty’ Sued for Securities Fraud over GameStop Rise

#83

Post by SkyMarshal »

Animats wrote: post #33
xiphias2 wrote: post #8

Earlier quoted context omitted.

A lot of people who think that buying puts is ,,too expensive''. Nassim Taleb made money by understanding that out of money call options were underpriced, not overpriced how people think generally. People don't learn from the past.

Taleb made money in 2008 by buying options that were way out of the money and hoping for a crash. All other years, his fund lost money. That strategy would have lost money over the last decade, because there wasn't a crash. Whether that strategy is a net win over a business cycle isn't known. Taleb's funds never published their full results.

Taleb's strategy doesn't depend on a crash per se, but on unusual volatility in either direction. He accumulates a portfolio of puts or calls that misprice tail risk.

And yes it sometimes takes years to pay off, during which time the fund is paying management fees and options purchase prices. So it bleeds money over time, and then makes it back and more at random intervals.

That's by design. In fact it's a similar model to Venture Capital in that way.

Re: ‘Roaring Kitty’ Sued for Securities Fraud over GameStop Rise

#84

Post by sgarman »

orliesaurus wrote: post #19

No way this is happening for real...he's suing /u/DeepFuckingValue because he took a loss trading? Then what's next? Suing your state's DoT every time you get a flat on the road?

As Matt Levine always says "Everything is securities fraud."

Re: ‘Roaring Kitty’ Sued for Securities Fraud over GameStop Rise

#85

Post by xiphias2 »

anm89 wrote: post #52
outoftheabyss wrote: post #12

I find it nauseating seeing the financial press, politicians and big time players claiming that their actions and ‘concern’ is based on not wanting retail investors to lose money as a stock peaks. Be honest, you don’t give a shit and even if this was your motivation, people have autonomy in the markets, although sometimes naive, they know the risks. Stop treating retail investors as children that need saving when in…

While big players systematically game things to put retail at a disadvantage every day and nobody complains. They are only taking action because they have an easy target they can score some political points on and who won't fight back

When people become multimillionaires, they are not easy targets anymore.

Re: ‘Roaring Kitty’ Sued for Securities Fraud over GameStop Rise

#86

Post by belltaco »

bionsystem wrote: post #76
fractionalhare wrote: post #42

Earlier quoted context omitted.

Yes. The initial cost of the trade is a credit equal to the price per call multiplied by the number of calls you sold. This is the maximum you can make. Your risk on the other hand is theoretically unlimited, because the price of the underlying is theoretically uncapped. That's when you sell a naked call. If you instead sell a covered call, you keep 100 * the number of calls sold in your account as collateral. Then y…

If you sell a covered call you have no risk right ? Aren't you just capping potential returns in exchange for immediate premium ?

I wouldn't term it as "no risk", anything you do in the stock market carries risk, it's just a different risk. And it's not even a capped risk, if the stock goes up to infinity most of the gains will be captured by the person that bought your call, and you'll be only left with the shares.

>Aren't you just capping potential returns

Yes

>in exchange for immediate premium ?

That's not the main goal though, the main hope is to have them expire worthless so you can pocket the premium(or just going down in price over the option time period so you can flip it before expiry). So the best case is the stock going just under the strike price at the time of expiry. It wouldn't really matter that much if the premium wasn't paid out immediately but was paid at expiry to you by your broker.

Re: ‘Roaring Kitty’ Sued for Securities Fraud over GameStop Rise

#87

Post by raziel2701 »

Selling calls on a meme stock in the middle of a short squeeze looks quite stupid to me. Especially naked calls, you're just asking to getting your face ripped off, and that's exactly what happened, and this guy is trying to shift the consequences of his dumb moves to a scapegoat.

There's really nothing redeeming about this lawsuit. Shame that Keith has become the focus of this show when really he did nothing wrong, it's just that he became the face of the squeeze and dumb people want to ascribe responsibility to him.

I guess it's a cautionary tale about coming out publicly, you become the target of very petty people. I hope the SEC does its job and goes after all the naked short selling and investigates all the failures to deliver that preceded the squeeze. But I'm cynical.

Re: ‘Roaring Kitty’ Sued for Securities Fraud over GameStop Rise

#88

Post by fractionalhare »

bionsystem wrote: post #76
fractionalhare wrote: post #42

Earlier quoted context omitted.

Yes. The initial cost of the trade is a credit equal to the price per call multiplied by the number of calls you sold. This is the maximum you can make. Your risk on the other hand is theoretically unlimited, because the price of the underlying is theoretically uncapped. That's when you sell a naked call. If you instead sell a covered call, you keep 100 * the number of calls sold in your account as collateral. Then y…

If you sell a covered call you have no risk right ? Aren't you just capping potential returns in exchange for immediate premium ?

No you do have risk, it's just defined. The risk is equal to the collateral, which "covers" you in the event you're "called." This means the price of the underlying has reached the strike price of the option contract, and the counterparty has exercised (as they almost certainly would). Then you are obligated to provide 100 shares of the underlying * the number of calls sold to the counterparty. If that occurs, you lose money - the amount of money you can lose is your risk. In the case of selling covered calls it's capped to the value of your collateral, but it's still risk.

Re: ‘Roaring Kitty’ Sued for Securities Fraud over GameStop Rise

#89

Post by choward »

Animats wrote: post #56
dilippkumar wrote: post #18

Earlier quoted context omitted.

> “Gill’s deceitful and manipulative conduct not only violated numerous industry regulations and rules, but also various securities laws by undermining the integrity of the market for GameStop shares,” the suit said. “He caused enormous losses not only to those who bought option contracts, but also to those who fell for Gill’s act and bought GameStop stock during the market frenzy at greatly inflated prices.” As a re…

Here are the rules for registered investment advisors.[1] This was a pump and dump. Those have been around since at least the 19th century. Older ones involved newspapers and newsletters. Newer ones involve social media. The SEC fines people for this regularly. This time, the suckers were people who hadn't seen this a few dozen times yet. [1] https://www.sec.gov/divisions/investment/iaregulation/memoia...

Has this guy ever been fined?

https://www.youtube.com/watch?v=J3ckpMQ4tgE

Re: ‘Roaring Kitty’ Sued for Securities Fraud over GameStop Rise

#90

Post by anticristi »

perennate wrote: post #58
silexia wrote: post #36

Earlier quoted context omitted.

I have seen a lot of protests defending Gill. I think there is another side to the story though with many people who lost money buying the stock (selling options is different) based on his advice. Gill is held to a much higher standard than a normal person as he is a licensed security broker. If you look at my comment history on HN, you will see at the time I was pointing out a lot of Redditors were engaging in a pum…

His comments about the company's value were about the fundamentals and, to a very limited extent, about a possible short squeeze: https://www.youtube.com/watch?v=alntJzg0Um4 And at most it seems he was giving his opinion about the company. He never said something like "everyone should buy GameStop because it's guaranteed to rise in value".

Man, he speaks fast!
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