Sources told Charlie Gasparino of FOX Business that it will be difficult for the SEC to open a case, since most of Reddit’s ads were anonymous.
The man who created Reddit’s WallStreetBets is not who you think he is.
He is 39 years old. He lives in Mexico City with his wife, a doctor, and spends weeks chasing his 3-year-old twins and taking care of his daily job as a consultant – hardly the type of character that anyone could associate with the turbulent investment forum.
He never imagined that the Reddit community he created in 2012 would become such a powerful force that it would put GameStop Corp’s stock. in excess, would almost bring down a hedge fund and leave professional money managers across the country looking at Twitter with your mouth open.
| Ticker | Safety | Last | change | Change % |
|---|---|---|---|---|
| GME | GAMESTOP CORP | 193.60 | -153.91 | -44.29% |
“It’s a bit like watching one of those horror movies where you can see the thug walking up the stairs slowly,” said Jaime Rogozinski. “You see this train crash happening in real time.”
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Mr. Rogozinski started WallStreetBets while working as an information technology consultant for the Inter-American Development Bank in Washington, DC. At that time, he was single, made a decent living and was looking for something to invest some fake money. The only problem was the conventional wisdom of keeping index-tracking funds boring him.
“I would go to different forums and ask them, ‘Hey, what do you think of XYZ?’ And most of the time the feeling would be ‘It’s too risky, don’t try to choose stocks, you will never win’ ”, he said.
The sober advice given in online communities like Bogleheads was not enough for him. Neither was the comment by investment bank analysts on cable TV, fixed as they were in net present values, cash flows and price / earnings ratios. He decided to create a hub on the message board operator’s Reddit, where people with similar ideas could come together to discuss exclusively the kind of negotiations that would make a financial advisor goose bumps. Their approach would be more like gambling than spreadsheet analysis, and their motto is something like “YOLO”, short for “you only live once”.
The group had only a few thousand subscribers in its early years – including former pharmaceutical executive Martin Shkreli, who briefly served as moderator before being convicted of securities fraud. (The WallStreetBets Twitter account wished him well in his March 2018 sentence.)
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Everything changed in 2019. The giants of brokerage Fidelity Investments and Charles Schwab Corp. eliminated trading commissions. Interest in retail trade exploded, and the number of WallStreetBets subscribers quickly surpassed 500,000 – then one million during the market’s liquidation in March 2020 and 2 million during the now notorious campaign to increase GameStop’s shares.
WallStreetBets users began to bet on everything from pandemic-stricken cruise operators to Lumber Liquidators Holdings Inc., the company involved in a scandal after reports that it installed floors with excessive amounts of formaldehyde. And they have shamelessly done so, celebrating both their victories and their losses with gusto. (The community dubbed the latter’s screenshots post, which often receives thousands of positive votes, as “lossy pornography.”)
“Many other places that discuss negotiations are really pretentious. At WallStreetBets it’s so much, ‘Look at my money!’ but also ‘look at all that money I lost’, and I think that’s what is invigorating for people, ”said Rogozinski.
At best, WallStreetBets showed that trading didn’t have to be exclusively a game of the man invested in Patagonia. It was part of the nascent movement to democratize the investment world, breaking down barriers to entry, even if some people were hit by brutal losses along the way. Many years ago, Rogozinski remembers having to call Wachovia and shell out a $ 30 or more commission to buy shares in Google Inc. Now, anyone with a phone or an Internet connection can start trading in minutes – and show your exploits or lack of them to thousands of other individuals.
“A large group of people organized themselves where they collectively sit at the poker table, which was previously invite-only,” said Rogozinski. “You can no longer ignore them.”
Looking beyond Jerome Powell’s forum pranks and memes, it became clear to Rogozinski that the WallStreetBets community had a weakness – a side he struggled with more and more to contend with.
First, there were possible legal problems. As WallStreetBets grew, it faced charges – often filed by angry short sellers – for manipulating the market. Moderators advised users not to post “for the purpose of instigating or coordinating a group effort to move the market for a title.” But that did not silence critics of the community.
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Then there was the hate speech. Last year, Mr. Rogozinski decided to do some household chores and clean up some of the most unpleasant content that was being shared in the community. In a chat room outside of Reddit associated with WallStreetBets, he found language full of obscenity, racism and anti-gay views that moderators overlook.
“There were a handful of mods who were supporters of white supremacy,” he said. As a Jew married to a Mexican woman, he found it impossible to swallow.
“I have very tough skin and people can say what they want to me, but at some point there is a moral point of view – like with my kids, I don’t want them to think, ‘Well, they can say what they want about you, ‘”he said.
Mr. Rogozinski ended up excluding the private chat room hosted at Discord, where offensive messages were exchanged. He also removed some of the moderators. The reaction was quick: a lot of users were annoyed by his actions – along with the promotion of a book based on WallStreetBets, as well as an esports trade competition under the name WallStreetBets – that he was kicked out by other moderators. He hasn’t moderated the community since April.
However, it was impossible for him to escape his legacy. Last week, he received a call from Citron Research founder Andrew Left. The short seller, who has been publicly betting against GameStop, begged Rogozinski for help. He said he was attacked by hordes of angry online investors, some of whom even targeted their children.
A spokeswoman for Reddit said the company prohibits users from posting or soliciting illegal transactions, doxing other people and engaging in threats of violence. She added that the company would “cooperate with valid investigations or law enforcement actions as needed”.
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Rogozinski, unable to do much outside, was hurt by Left’s call.
When big investors like Carl Icahn and Bill Ackman get involved in a public fight, “it’s like watching a heavyweight boxing match,” he said. But when an online mafia goes after an investor’s children or spouse – it goes too far, he said.
“It’s not what it used to be,” he said.