Gill was not charged at the time, but this time may have been different. The Massachusetts securities regulator confirmed that it was look round Gill’s recent behavior, without providing details. Gill appears to be aware of the risk of provoking an SEC investigation. On May 16, he published a clip of an interview on CNBC in which Jay Clayton, former chairman of the SEC, expressed his view that his behavior should not be tolerated. The SEC declined to comment on the existence of an investigation.
At the beginning of Gill’s YouTube livestream, a lengthy statement scrolled up the screen like the opening crawl of Star Wars. “You should not take any opinion expressed on this Youtube seriously [sic] as a kind of incentive to make a specific investment or adopt a specific strategy,” we read. As Gill bantered with his YouTube viewers – all of them 600,000 of them – GameStop’s stock price briefly rose. “Damn, look at this. It’s going up,” he said. “Do I have to be careful what I say here? I really don’t know.
It might seem obvious that Gill’s posts, while cryptic, have driven up the price of GameStop stock, from which he stands to profit as a shareholder. But without a full history of his trading, it’s difficult to assess whether he violated securities laws, says Richard Schulman, a partner at Adler & Stachenfeld. “It’s never really clear until the facts are fully established,” he says.
But Gill gave regulators a lot to think about. “Was his goal to influence stock price movements? Did it actually affect the demand for shares? Will he make money from these activities? These are issues that the regulator will want to investigate,” Schulman says. The answers could determine whether Gill faces a formal investigation.
In particular, Gill could find himself in trouble when his call options expire on June 21, leaving him with a decision: Should he sell his options for a profit if the stock price remains high, or take back the GameStop shares they represent? Bragança argues that once Gill goes public, he has a duty, under a little-understood aspect of securities law, to warn his audience in advance of any sales, even if doing so would jeopardize profits. “The problem comes when you change positions,” Bragança says. “Before you sell, you better tell the market about it. Most people on social media don’t think that. Initial [social] the posts aren’t what will get him in trouble – it’s the stuff we can’t see.”
Gill may question how his behavior differs from that of other experts offering stock advice or a CEO talking about their company. And he might have been right. To some extent, Gill is flirting with gray areas in a securities regulatory body that was developed long before anyone imagined an influencer could take over the market with a single tweet.
However, the SEC has typically maintained that the rules are malleable enough to deal with mutations in long-standing violations. “Market manipulation is not necessarily a rigid concept,” says Schulman. “The SEC is not unaccustomed to trying to apply concepts to new situations in the developed world.”
The SEC has not made its opinion public, but former CEO Clayton suggested in an interview with CNBC that the agency would be keen to prevent further GameStop price volatility, which could expose investors to huge losses. One way to achieve this would be to bring a case against someone who they believe has exercised social influence in an unlawful manner, in order to stop others from doing the same. “It’s like Aesop’s fables,” Bragança says. “We are telling a story. You should draw a moral from this.