The YouTuber known as Roaring Kitty, who became the face of the GameStop stock frenzy and also worked until last week as a broker, may be in legal trouble for potential violations of federal rules governing brokers’ communications with the public.
Keith Gill, 34, made a big bet on GameStop shares over a year ago and shared his thoughts on online stocks in the months leading up to the “meme stock” bubble.
But his comment could create a problem for Massachusetts Mutual Life Insurance Co., which employed him and had a duty to supervise him.
Keith Gill, the YouTuber known as Roaring Kitty, is facing regulatory scrutiny
Massachusetts securities regulators are investigating Gill and his former job as director of education for financial well-being at insurance company MassMutual.
The company told regulators that it was unaware of Gill’s videos on YouTube promoting GameStop’s actions and that, had it known, it would have asked him to stop or fire him, according to the New York Times.
Although he did not advise specific clients on investments or insurance, he was not exempt from regulations that strictly regulate the conduct of brokers, securities lawyers suggested to the Wall Street Journal.
The once obscure YouTuber has become an unlikely celebrity in the confrontation between small investors and large hedge funds, and is seen by some as a popular hero and others as a dangerous market troublemaker.
Gill first introduced GameStop as a potential investment over a year ago
The Financial Industry Regulatory Authority (Finra) may very well be examining Gill more closely
After the shares of the video game retailer skyrocketed 1,600 percent in January, when small investors inspired by the WallStreetBets message board on Reddit grabbed the stock to punish hedge funds that bet against it, the bubble collapsed this week, and fell more than 70 percent since Monday.
Gill worked as a ‘director of financial welfare education’, but he was a registered broker. He has already withdrawn more than $ 13 million in his trades and was sitting on another $ 7.6 million in earnings on Wednesday, according to a screenshot of his brokerage account he posted on Reddit. At the height of the frenzy last week, his account was worth almost $ 48 million.
Gill gave his notice at MassMutual on January 21, but technically he was still employed there until January 28, when the GameStop frenzy was approaching its peak, the company told regulators.
Gill left his job at MassMutual on January 21, when GameStop’s stock exploded
He is a licensed securities broker and licensed professionals have an ‘obligation’ to inform their employers about their outside activities, said William Galvin, Massachusetts community secretary.
On Friday, Galvin’s office sent a letter to MassMutual seeking information about Gill’s employment and whether the company was aware of its outside activities.
“I’m not trying to inhibit anyone’s ability to access the market,” said Galvin. ‘The issue here is transparency.’
In the past six months, Gill has posted dozens of videos, mostly related to his view that GameStop’s shares were undervalued and would rise as others noticed.
Some videos analyzed Gamestop’s past performance and predictions, but even posting online using a pseudonym does not exempt it from regulatory obligations, said attorney Susan Light.
Gill is seen last week at his rented Massachusetts home, where he lives with his wife and two-year-old daughter.
GameStop shares, which shot 1,800 percent in January in a speculative bubble fueled by small investors, fell nearly 84 percent in the first four days of this month
‘An ordinary Joe can go on a website and say,’ I like XYZ shares. ‘A broker cannot do this. It would make sense that the Financial Industry Regulatory Authority (Finra) would be interested in examining this. ‘
“If you have a registered person trading securities outside the company and making recommendations to the general public, it is potentially a major oversight failure,” Brad Bennett, former Finra director of oversight, told the Journal.
‘After 40 years in the industry, I have no doubt that if you are a registered representative [of a brokerage firm], you should not communicate with anyone on Reddit, ‘said Bill Singer, a regulatory defense attorney. “This is the safest thing to do.”
Gill’s videos include a disclaimer saying that investors should consult with a financial advisor before making any investment decision and ‘should not treat any opinion expressed on this YouTube channel as a specific incentive to make a particular investment.’
Roaring Kitty continued to create topical memes about the rising stock price
Andrew Calamari, a lawyer at Finn Dixon & Herling and a former director of the Securities and Exchange Commission office in New York, told the Times that it was too early to determine whether Gill had violated any securities regulations.
But he said Gill could have violated the company’s rules on MassMutual if he hadn’t been allowed to post on Reddit and YouTube.
“Companies don’t allow employees to go out and make predictions about stocks,” he said of employees other than analysts.
Gill hasn’t posted on YouTube since January 22 and on Wednesday announced on Reddit that he would no longer provide daily updates on his position on GameStop.
He remained silent about the controversy, in addition to an interview with the Wall Street Journal last week.
“I didn’t expect this,” he said. ‘This story is much bigger than me … I support these retail investors, their ability to make a statement.’
Gill made an initial investment in GameStop of around $ 53,000 in June 2019. He later added to the investment, plowing a total of $ 745,991.
A five-day view of GameStop’s stock price shows the sharp drop from its peak last week
GameStop’s share price is seen in a year-long view, showing both rising and falling stocks
In his most recent YouTube videos, filmed in his basement, he celebrated his success with up to 200,000 fans, wearing sunglasses and a shoulder strap and holding dips in chicken tents (the mascot food of his followers) in Prosecco.
Gill gained notoriety on the Reddit WallStreetBets commercial forum by posting regular updates to his’ YOLO [You Only Live Once]’trade starting in 2019 under the username DeepF *** ingValue.
But Gill told the Journal that his original decision to buy – initially ridiculed on WallStreetBets before being venerated – was based on fundamentals about the company.
“People were doing a quick assessment, saying GameStop would be the next Blockbuster,” he said, referring to the video store practically destroyed by the decline in retail and the increase in streaming services.
‘It looked like a lot of people just weren’t digging deeper. It was a gross error in classifying the opportunity, ‘he said.