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♪ What happened to my greenback dollar ♪
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Stocks. Never in a million years
did I think I'd be making a film about the stock market.
It's certainly not a documentary.
That's me, by the way.
I spend most of my time writing,
not poetry or anything fancy but screenplays.
I fucking love screenplays.
I've got a twin brother. That's us.
He's a musician, mostly. A damn good one.
And loves hanging out with this pug in his dark room.
Like most millennials, we grew up in a golden age
of video games and action movies,
which helped as we were to experience the war on drugs...
- Just say no. - ...9/11, war on terror, The Great Recession,
insurmountable college debt, a housing crisis,
a global pandemic,
unprecedented credit card debt,
and all the while the media bitched at us
about avocado toast and entitlement.
I just want to afford a house and groceries.
Fuck me, right?
So in January 2021,
- we bought into GameStop. - We like the Stop.
You maybe heard a bit on the news about this crazy thing
that happened where all these basement-dwelling neckbeards
on Reddit decided to take down some hedge funds.
- Yeah, that's part of it, but only part. - Hey, bro.
- We just need a little intro. That's all. - That's what I'm doing.
- I'm in the middle of it. - Okay. Just get to the point, though.
I am.
Let me fucking finish!
Okay.
What happened in January of 2021
was just the tip of the iceberg.
The whole story is much worse
and it affects every single one of you.
So the movie's called Apes Together Strong.
But what is an ape?
Apes, man, are just regular, everyday people.
To me, an ape is someone...
A person that doesn't go to a broker to seek advice
on what they should invest in.
...someone that has diamond hands.
This is a movie. We're doing all right.
Uh, you know, the apes
are a fascinating community.
So, an ape, essentially, is just, uh, a retail investor.
People from all walks of life, for sure,
from every part of the political spectrum.
They want more transparency in the market
and they're really battling for more of a fair playing field.
We're not doing anything malicious.
We're just trying to get a fair marketplace.
This community has formed on its own using technology
both to organize itself and to access markets.
I definitely think this is creating a new breed of investors.
And it really embodies
this retail investment ethos.
You're in charge of your financial future.
That is a thing that Wall Street has never seen before.
An ape is somebody that took a bet on themselves.
"I'm already struggling.
What do I have to lose?"
Okay, bro, where do you want to start?
Let's start with just some clean drone footage.
Yeah, like, floating through a, a big, expensive city.
Or just, just some dude barefoot,
on a log, in the middle of nowhere.
Yeah, that's super artsy
and, and we have some piano music going.
It's definitely a documentary.
And some guys just staring at the, the stock market.
Everyone can conjure up images of the Great Depression.
We have this abstract idea that a bunch of people were poor
and that the stock market crashed.
But we're too far removed to remember
that much of this was caused
by the ultra-wealthy gambling
with other people's money.
Giant commercial banks were out of control.
The Glass-Steagall Act was a direct response to this.
The act enforced banks to only use depositors' money
in safe investments. And it worked.
For nearly 40 years, the US financial system prospered
without a single crisis.
Regulation was protecting the real economy.
That is until this guy came along.
B-movie actor Ronald Reagan
- was elected president in 1980. -"I, Ronald Reagan"...
And along with the help from his treasury secretary,
former Merrill Lynch CEO
Donald Regan, Reagan proceeded
to free Wall Street from the shackles of regulation.
A year later, the Garn-St Germain Depository Institutions Act of 1982...
That's the short title.
...deregulated the mortgage industry,
allowing banks to provide adjustable-rate mortgage loans.
But, of course, it didn't stop there.
The Clinton administration,
with Larry Summers as his treasury secretary,
signed the Gramm-Leach-Bliley Act into law,
gutting the Glass-Steagall Act
and taking away the SEC's authority to regulate
large investment bank holding companies, like Goldman Sachs,
Morgan Stanley, Merrill Lynch,
Lehman Brothers and Bear Stearns.
The next guy didn't do any better.
Some of these products were used irresponsibly.
Some lenders made loans that borrowers did not understand,
especially in the subprime sector.
I, uh, was foreclosed on in 2008
after returning back from Iraq.
I got a terrible subprime mortgage.
Um, I just...
...really wanted a place to feel safe.
But I didn't really know
that I was a victim of something that
millions of other Americans have been a victim of.
Major financial institutions
have teetered on the edge of collapse
and some have failed.
In 2008, the global economy
was thrown into a recession
by the unbridled greed of Wall Street's biggest firms.
Make no mistake, this crisis was the direct result
of decades of deregulation in our capital markets.
We've been on a 40-year tear to dismantle oversight, regulation
and accountability in our financial systems.
All for the pursuit of abstract wealth
made off the backs of people like you and me.
Only if our government grows less
will our economy grow more.
This ever-growing hydra of red and blue oligarchs,
threatens not only our retirements
but our flailing democracy.
This became all too painfully clear
as the bottom 99% of us suffered
through the worst pandemic in a century
while the top 1%
added trillions to their wealth.
That money didn't come from nowhere.
It came from you.
A Washington State resident fell ill after returning
from Wuhan, China, where the outbreak began.
Officials now say more than 400...
You know, during the pandemic, I was, uh, really struggling, for sure.
I just graduated college
and was embarking on this journey of the military,
which is something that I never saw for myself a couple years ago.
From 2016 to 2020,
I was serving in the Air Force.
There is a certain mindset that you get into
when you have to carry a gun with you everywhere for your own safety.
And, at all times, you have to be
like, having your wits about you.
Being in an environment where you're constantly at war,
it, uh, gives you a new perspective on life.
Right now, at the time of filming, I'm, like, 30 years old.
It took me a second to think about that. I don't know.
I kind of stopped counting after 21.
Um, I want to say I'm, I'm too outgoing.
When I-- like I said, I, I'm more of a homebody.
Like, I, I work a lot.
My family comes from Mexico. Um...
My dad, he came here pretty young,
worked here a couple of years until, I guess,
he was able to get, um, his-- the amnesty
and become a resident.
My name's Kat Stryker. I'm a bartender.
H-- how would I describe myself?
Very outgoing.
I was a troublemaker.
I went to juvenile hall twice.
What saved me was my son.
I was 16 when I got pregnant, 17 when I had him.
It changed my outlook.
I needed to change everything
and focus on raising a human.
When I started investing,
I, uh, got into it eight years ago.
My adopted dad, he told me
that I should invest in my future
and he told me to get into stocks.
So this is the fun part about this grill.
This kind of funnels all the heat into one place.
Dad passed away when I was four.
Um, my mom, my grandmother
and my two brothers and my sisters
b-- basically raised me. Um...
We didn't have much, but at the same time,
we were rich with love,
like my grandmother used to say.
So we, uh, we kind of-- we kind of made do with what we had.
We are in Baton Rouge
at the first house I ever bought.
My house.
This would be considered...
...North Baton Rouge, um,
it would be, you know, they would say it's a high-crime area and all that,
but I've never experienced any of that that here.
My neighbor across the street, right there,
I still take her vegetables.
Cousin, he stays right there.
She makes the best gumbo in the world.
I've watched all these people pass on
and their children take the houses.
This is just a newer suburb
than the one that I used to live in.
Because at the end of the day, you are what you are.
Try to make the best out of it.
Good afternoon, you bunch of beautiful freaking chickens!
It is your boy Trey coming back here again.
What is up, everybody? Welcome to TreysTrades.
We freaking talk fast, and don't skip class, baby.
Like a brother of mine said, I'm not a financial advisor expert.
So take what I say with a grain of salt.
Let's get into the video. So, today, my friends...
I grew up in a small town freaking hillbilly Minnesota.
Uh, the town was called Bowlus.
So I was super passionate about running.
The thing that I wanted to do with my life
was qualify for the Olympic trials in the marathon.
When my dad died, uh, he had a heart attack
and that's scary for me
because I have a genetic defect.
It's a heart shunt. I've got scar tissue on my, on my heart,
uh, from lateral infarctions,
which is a fancy doctor bullshit for heart attack.
Uh, so that hits home.
It, it definitely hits home. Um...
For a lot of us,
the pandemic was terrifying.
It was isolating...
...and difficult.
But for the first time in a long time,
working-class people had a chance
to pull their heads out of the grind
and maybe learn something new.
Like, figuring out the fucking stock market.
In April of 2020,
every eligible adult in the US received
$1200 in the form of a stimulus check.
This came as the trading app Robinhood,
made the market accessible, simple and cheap
for anyone with a cell phone and cash to burn.
Vlad Tenev, who is the CEO of Robinhood,
that you may have used to trade stocks
for free, without commissions.
In 2019 to 2021, Robinhood's user base grew
from ten million to more than 20 million people...
People have been super distrustful of Wall Street.
...with working-class folks looking to cash in
on what felt like an invincible economy.
It's felt like a rigged system for them.
Retail investors were primed to take the market by storm.
The rocket ship was built.
All that needed was fuel.
So, Reddit itself is this online community
where anybody with computer access and Internet access
can go on there, make an account and they can talk.
All of a sudden, you had a lot of people with nothing better to do
other than getting some stimi checks,
you know, looking around at the-- at the stock market.
I was not one for social media.
I was on Reddit maybe, like, occasionally, just, just for the social aspect.
If you love bread,
you can find a community
dedicated to just bread.
I think it's called Reddit.
The pandemic allowed for a lot of people
to connect with people like they haven't done before.
I am pretty sure I found wallstreetbets
in 2018 or 2019.
On one hand, it's kind of,
"Oh, yeah, we love stocks and we love making money."
But on the other hand, it's also like,
"Yeah!"
I, I found my people.
The gift and the curse of, of the pandemic
is that it allowed people to figure out what to do
it, it took away the, the family outing,
it took away, you know, the eating out every day.
You had people that had a couple of extra bucks
and you also had a lot of people
looking at this all at the same time.
And it was on Reddit, which was free.
There was an online community,
with this drumbeat,
um, that was so loud.
And one of my friends fatefully told me about GameStop,
The first thing that resonated to me about GameStop
was just the David versus Goliath,
retail investors versus hedge funds story.
Like, I get this. People are breaking this down in ways that I can understand,
and a lot of people were doing that at the same time.
So I, I bought my table stakes. I got in--
- Hang on, stop. - What?
We can't get into Keith Gill and GameStop
until I've covered some basic shit first.
Like, short selling and what are markets for. Like, that kind of stuff.
Yeah, like everything that this story involves.
- Okay, that's fair enough. - Basic shit.
"By 'basic shit,' we, the filmmakers mean all the rudimentary information
about the stock market that we think you should probably know
before moving on in this story. After all, these subjects are
intentionally complicated to get the average person
from understanding enough to know that the market
is built to profit from and extract wealth
from your current and future prosperity.
This is not financial advice,
we are not financial advisors."
My name's Lisa Bragança and I'm a former SEC Branch Chief.
I handled lots of investigations
and then supervised people handling investigations
of potential violations of securities laws.
I'm David Lauer.
Uh, I used to be a quantitative analyst
at Citadel Investment Group.
Through a long and sort of convoluted series of events,
I ended up, uh, testifying before the US Senate
Banking Committee on high-frequency trading
and I saw that there was a serious problem
in terms of the access
that the retail investor has to data and tools
and decided, you know, that that was something I could fix.
I'm Dennis Kelleher. I'm the cofounder,
president and CEO
of a nonprofit organization called Better Markets.
Thank you for the invitation to Better Markets to testify today.
It is unacceptable that brokers and others today
are allowed to put their economic interests
above their client's best interest.
We have about 15 staff who promote the public interest
in the financial markets throughout the policymaking process in Washington, D.C.
We have a stock market
so that individuals who want to make something,
want to offer services,
want to create a business,
can raise capital to fund their growth.
That is the fundamental purpose of having a stock market.
Capitalism only functions
when you have markets
that can adequately provide capital and price discovery.
Let's break this down with an example.
Company A wants to grow their business.
They need money to do so.
So they go to the stock market
and sell 100 shares to the general public.
These shares are called the float.
Individual investors who want to grow their money
bring it to the stock market,
where they invest in companies like Company A.
They fight over how much that company is worth
until the price is discovered.
- This is called price discovery.
At its most basic level, the price of these shares
is determined by both supply, or how many there are,
and demand, or how badly people want them.
Realistically, there won't always be someone
willing to buy or sell a share from you
when you want to buy or sell your shares,
which is why we have market makers.
A market maker's function is to provide liquidity.
And liquidity is like
oil in the gears of a machine. It keeps it moving.
Oftentimes, you have more buy orders
than you have sell orders or more sell orders than you have by orders.
It's rare that you're going to have it be perfectly equal.
So the market maker is
somebody who, kind of, stands in the middle,
prepared to be the other side of a trade
when there isn't somebody in the marketplace at that moment.
Let's say you want to buy a share of GameStop.
You can't just walk into the stock market and buy that share.
You have to go through a licensed broker like Robinhood.
Retail investors have never had it this easy.
You can be pretty much anywhere.
Open up your phone, put in your order
and hit "Buy."
When you hear the mission of Robinhood,
"To democratize finance for all,"
it's really about giving access to everyone
what was once reserved for the 1%
or the, the very wealthy.
I wanted to play more of a principal role
in my financial future
and the financial future of my family.
But what I think we all have in common
is that is enough.
People are tired.
People are frustrated. People are angry.
People are, are mad at just surviving.
And no matter what class you're in,
if you're lower class,
if you're lower middle class, if you're upper middle class,
if you're not in that 1% bracket,
that high tax bracket...
...you're a second away.
You, uh, slip and fall at work
with no medical leave.
Blood pressure medication needs to be taken every day.
Lights need to be on, running water needs to be on,
gas needs to be there for a few.
People have come together
and united over so many things
because we're regular people
that deal with traumatic shit every day.
On one side of the trade, you got the retail investor
that decided to take a bet on themselves.
And then on the other side, you got...
...the rich...
...covering themselves by laws that said it's legal.
The one thing you have to know is that,
with every trade, there's a financial intermediary
making a killing.
And that's coming out of the pockets of the retail traders.
Now, most of us think that when we buy a stock through our broker...
- ...we're buying it on the stock exchange.
But the truth is,
almost none of our retail trades
ever see the light of day.
Because our capital markets
have become far more fragmented
and complicated than they need to be.
We have many places where stocks can be bought or sold.
These are called venues.
So, venues is a very generic term
to refer to any kind of trading venue.
So, any place where a buy order can find a sell order
and result in a trade.
These include lit markets
like the New York Stock Exchange,
where you can see everything that's going on,
or dark pools, where large institutional orders
are executed in secret
so as not to affect the stock price.
Retail, uh, executes off-exchange.
Because retail orders are bought by Citadel and Virtu
and they execute in their internalization systems.
That's the area that other countries have outlawed.
Because they understand that large trades happening off-exchange
are fine and often, a good outcome.
Small trades happening off-exchange are not.
So why aren't our retail trades executed
on lit exchanges like the New York Stock Exchange
and instead deep in the halls of giant firms like Citadel?
Payment for order flow is a practice
that was, uh, popularized by Bernie Madoff.
Bernard Madoff has just been sentenced
for the biggest investment fraud in Wall Street history.
What he found was that
- as a market maker-- - Whoa, whoa, whoa! Pause it, please.
- Yeah?
Bernie Madoff? Like,
worst financial criminal in history?
Yeah, that's the guy. That Bernie Madoff is the one
that invented payment for order flow.
Oh, my God! Dude, that's so bad.
And we're still using that?
Yeah. I mean, it's, it's a solid scam.
That makes sense.
- You ready? - Yeah, I guess.
- Moving on? - Roll it.
So payment for order flow is a practice that was,
uh, popularized by Bernie Madoff,
and, um, what he found was that,
as a "market maker,"
he could take order flow from a broker
and make money off of it.
With payment for order flow, firms like Citadel,
who claim to be a market maker, pay Robinhood for the orders
that Robinhood customers, like you and me, submit.
They fill that order from their own inventory
and skim a few cents off the deal,
then deliver your shares.
A broker, a retail broker, has a duty of best execution.
And that duty of best execution is to get their client the best price possible.
Some brokers take that seriously, and most don't.
These brokers are supposed to hop from venue to venue,
looking for best execution on your orders.
But more often than not, they're just kicking those orders
to the highest bidder.
And Robinhood was even fined for prioritizing Citadel
because they were getting paid over finding you the best deal.
And before Citadel ever got into the game of market making,
they even torched payment for order flow
in a 2004 letter to the SEC,
saying that it "distorts order routing decisions,
is anti-competitive
and creates an obvious and substantial
conflict of interest."
Somewhere in the neighborhood of 90% of retail trading
gets executed in dark markets.
Well, of course, the Robinhoods and Citadels of the world say,
"Because that's where you get the best execution
and you get the best price,
whether you're buying or selling."
Now we at Better Markets, have a hard time believing that
when we see the billions and billions of dollars
being pocketed by the Robinhoods and Citadels of the world.
Because you have to ask yourself, "Where's that coming from?"
Only coming from one place.
Retail investors in the buy side.
To be clear, Citadel is Robinhood's biggest customer.
You are the product.
You're sold this fake dream
that when you're either lower middle class
or you're poor, that if you work hard
and you invest into the market,
that's basically your golden ticket
to, you know, to become successful.
And to be honest, I think it's basically, a lot of bullshit. It's a lie.
They just need us, people like me, retail investors, you know,
the lower middle class, the poor people, to steadily put our money in
thinking that one day we'll finally get that golden ticket,
that lottery ticket, you know, to be successful when, you know, we don't.
They just take-- they take our money
because they know the tricks and trades
and stuff like that.
And it just--
It gives you a headache. So...
So, my name is Austin Tobitt,
and I got my bachelors in accounting, got my masters in accounting,
and then went into more of the data sciences
and the data analytics side of things,
um, but always dabbled in financial shit.
The stock market is the dream for a lot of people
that come from this old school
or traditional mindset of, you know,
"If you work hard, you put your money in the right place,
you'll be able to invest in something.
Hopefully, you know, strike it big.
You could be the next,
uh, big investor in Apple in the '80s."
Like, if you-- you know, it's, it's like Forrest Gump, man,
you hit, you hit that home run
and, uh, "We don't have to worry about money anymore."
A big part of,
um, what we have lost
in modern markets, where speculation has become
90% of trading,
is that markets are not a casino.
How secure is that investment?
If I look at that old school mindset
and I say, "Just leave my money in there..."
I mean, look at 2008, you have people working for 30 years
trying to put money into a savings account or an investment account
and by the time they're getting ready to retire,
like, one or two years from retiring, '08 hits.
Wall Street, in itself, is sort of the poster child
for wealth and income inequality.
You've got this enormous industry
of people making money off of money
and mostly making rich people richer.
Especially, the great financial crisis
impacted the average person
far more than it impacted the average trader
or the average investment banker.
Uh, they still got their bonuses.
Their firms were bailed out.
You know, they've continued,
uh, business as usual,
uh, risk taking as usual
and amassing wealth as usual.
And I-- you know, to me,
that's just a recipe for disaster.
There are two major types of investors.
There are regular people and what are known as sort of institutional investors,
which are considered to be more sophisticated investors
that do a lot more trading.
Things like mutual funds,
pension funds, hedge funds.
Imagine a room full of rich people
and they all want to be a lot richer.
They each put a large amount in the hands of a hedge fund.
Hedge funds then invest that money into risky positions,
often using excessive leverage
to exaggerate their gains.
These risky investments
are managed by rock star investors
such as this guy,
Gabe Plotkin of Melvin Capital.
Now, unfortunately, over time,
our markets, like too much of our economy,
have become what's called financialized.
Which is to say they are obsessively focused
on short-term financial returns.
You can see that in a variety of ways.
Um, one example is short selling.
Well, GameStop looks to be heading down the same path
as Blockbuster and Sam Goody.
The retail giant will close
more than 180 stores across the globe
as they continue to struggle with sales.
The company said the closures at underperforming locations
will take place over a six-month period...
The world's largest movie theater chain was already struggling
before the coronavirus outbreak and--
Uh, we've been the victim of some short selling, during the year.
There might have been some game playing with our stock today.
A short sale is what you do
when you want to bet that the price of a stock goes down.
So, short selling is selling something
that you don't own right now.
You buy a stock if you think the stock is going to go up
and you short a stock if you think that the stock is going to go down.
How do you do that? How do you sell something you don't own?
There are lots of people out there
who have stock and they're just sitting on it.
Could be me, could be a pension fund.
And a short seller is able
to go and borrow that share
and now sell it to someone else,
expecting the price will go down
and the short seller gets to pocket the difference.
The price of a stock
can go down only a certain amount before it hits zero.
The price of a stock can go up
an infinite amount,
causing the short seller potentially infinite losses.
I know we just explained short selling
a couple of different times,
but I really think we need a visual.
Didn't Tobitt have a good example?
He did.
Why don't we just dress you up like a short seller
- and go shoot it? - Okay.
This example goes like this.
I'm going to travel to my neighbor's house,
and I'm going to say, "Hey,
I want to borrow that five-pound bag
of sugar from you, okay?"
Let's say the price of this sugar is $10.
So my neighbor says, "Sure, I've got a bag of sugar. I'll give it to you."
I say, "Thank you. I will pay you back."
So as soon as I borrow that bag of sugar,
I'm gonna say "Thank you" to my neighbor, and I'm going to turn around
and go to the market, and I'm going to sell that bag of sugar for $10.
And as the price of sugar goes down--
because I believed the price of sugar was going to go down.
So as it goes down and it gets to the seven, the five, the four,
whenever it hits a price where I believe,
"That's probably the rock bottom.
I believe that's the bottom-out price of sugar."
Let's say it's $5.
I'm going to go back into the market--
Remember, I sold it initially for ten.
So I'm going to go back into the market,
I'm going to buy that same bag,
that five-pound bag of sugar, for $5
and I'm going to bring it back to the neighbor that I borrowed it from.
So the neighbor gets their five-pound bag of sugar back,
I pocket $5...
Because it only cost me five to buy it back.
...and everything is the same. Nobody knows any different.
Now, the opposite is also true there.
Because, what if I'm wrong?
What if the price of sugar goes from $10 to $20
and my neighbor says, "Hey, sugar is getting pretty expensive
and I want my bag back"? Well, too bad.
You've got to go into the market,
be accountable for your bad bet
and buy sugar at a more expensive price.
And that's why, when they say,
"S-- short selling has an unlimited loss,"
they mean it's an unlimited loss.
I can talk about the various type of short sellers
and what I used to do, uh, professionally.
And short sellers are often, uh, on the lookout
for companies that are engaged in fraud,
where they're actually, uh, making false statements
about their financials, their prospects,
their competitors, their products.
And one of the best examples of that
that many people know is Enron.
It may be perceived by some that I have something to hide.
Uh, my most recent short in that area
is a company called Mymetics.
I exposed the CEO for ripping off the VA,
for making up numbers, cooking the books.
- So, so, so you're saying if,
if you put out a false press release,
you can be fined and go to jail. Is that what you're gonna say?
That's what the-- that's what the laws and regulations are.
You no-good, rat bastard motherfuckers.
That's a good public service.
Now, they weren't doing it
just to be good public servants.
They had massive short positions in the stock.
There is no better feeling than getting something right
and, in my mind, for the right reason.
All short sellers claim they do nothing
but great public services
by making sure all stocks are efficient
and hunting for fraud at all times.
That's not true, okay?
A whole bunches of them are engaged
in predatory, antisocial, if not illegal, conduct.
When a, a small percentage
of the float of a company is short,
it can be healthy.
You want...
...disagreement in markets.
That, that is the essence of markets,
is people disagree
and they are putting their money where their mouth is.
One person thinks a company is worth more than another person.
And the, the market is this attempt by the crowd
to come up with what something is worth.
All right. Basics covered.
We know that markets are supposed to be a place
where people go to raise money for their businesses,
where others argue over what that business is worth.
You have to go through a broker like Robinhood to buy stocks.
You can bet on the success of a company by going long.
You can bet on the decline of a company by going short.
And a hedge fund is a group of rich assholes
wanting to gamble with other people's money.
There were a group of investors on Reddit
who were driven by a couple of different motivations.
But when you said GameStop was going to be a big winner,
everyone thought you were tripping. Up 13 %.
- You still like it? - I still like it. Yes.
- Same store sales over the holidays were up ten-- - What store?
- It seems like they closed them all. - No, no, there's, there's some--
A lot of people thought it was, sort of, an obvious company where, you know,
maybe it doesn't necessarily have that great of a future,
given sort of the, the downfall of retail and all of that.
Keith Gill was kind of the first guy on Reddit to blow this all up.
He's the one who presented the bull case,
made his thesis out on wallstreetbets.
For a long time, he ate some shit.
Game begin.
This is going to be the first video of the Kitty Corner.
And the market has kind of forced my hand on this one.
The first stock that I'm gonna talk about is GameStop.
Keith Gill, known on YouTube and Twitter as Roaring Kitty
and on Reddit as DeepFuckingValue,
sought GameStop or GME as a wildly undervalued company.
Yeah, I think everyone else is crazy... and I think I'm right.
But I've been wrong plenty of times in the past.
There was nothing overcomplicated
about his strategy.
Based on publicly available information,
he came to the conclusion that GameStop
was worth more than the price it was trading at.
So this is some of the heaviest negative sentiment I've, I've seen,
uh, with a stock. "I haven't shopped there in years.
All my friends haven't shopped there in years.
You download everything. Digital's the future,
GameStop's the next Blockbuster." That's a popular one.
It just reminds me of Blockbuster.
In a sea of crassness
and debauchery on wallstreetbets,
Keith Gill was a good-natured breath of fresh air.
Happy St. Patrick's Day to everybody
and a deep fucking cheers to all y'all.
- He not only knew his shit... - Look at this.
...but was supremely confident in his playing.
So confident that on Sunday,
September 8th, 2019, at 1:12 p.m.,
he posted his first YOLO post,
revealing a $53,000 bet that GameStop's stock price
would shoot to the moon.
Shorting, where you're betting
that the-- that the price of a stock is gonna go down,
is sort of viewed, uh, poorly by people.
And the reason is that it can be viewed as sort of a predatory tactic.
Because there are investors who will short a stock
and then they'll sort of purposely try and tank the stock.
In 2016, Melvin Capital
revealed its first short position in GameStop,
beginning a years-long campaign
to profit from the company's demise.
Unfortunately, nowadays,
there appears to be more bad guys than good guys
and they're just trying to grab
as much money as fast as possible.
"Consequences be damned" is the attitude.
As you start to learn more about it
and the bigger picture that's going on
with short selling, you start to realize
that it's really become more profitable
for these companies or these hedge funds like Melvin Capital,
to bankrupt a company,
than it is to bet in terms of, like,
the longevity of the company.
Was it--
I don't think...
...that really goes on.
I don't think Melvin was trying
to push GameStop out of business.
From what I understand,
the fellow actually does his research
and he was shorting GameStop for a long time.
And I think he had a successful trade
because he views it as a dying business
and he was shorted and he was successful.
But at that point, I think arrogance got the best of him
along with some form of greed
and he should have just covered and gone home.
He didn't need to destroy the company at the end of the day
'cause GameStop harmed nobody.
Short sellers ramped up their bearish bets
by targeting not only GameStop,
but other struggling companies like Nokia, BlackBerry,
Bed Bath Beyond and AMC Theaters.
These are tough times for everybody where our minds are very much on our customers.
A million a day or-- can't go to the movie theaters right now,
and our 27,000 American employees
uh, who have nothing to do 'cause we are shuttered and closed.
AMC, back in January, maybe even a year before that,
there was a good thesis for the company going bankrupt.
And if you want to bet on a company going bankrupt,
as long as your intent is not to bankrupt the company, do as you please.
I wouldn't do it. I wouldn't like to bet against the economy.
That's not my thing. But if you're trying to make money
purely from a money standpoint, whatever, I get it.
But the problem is that they intended for the company to go bankrupt.
They wanted the company to go bankrupt.
See, short selling has an added bonus.
If a trader has a short position in a company,
and that company goes bankrupt, the short seller doesn't have to buy back
and return the shares that they borrowed.
To me, I felt that the entire reason
for investing in the markets
was because we wanted to invest in companies.
We wanted to invest in growth.
Let's change things for the better.
Let's innovate, let's create,
let's do something different that nobody else has done.
For the market to be
basically hounded by the short sellers,
who are fighting against this innovation,
who are putting up barriers for us
and including stuff like cancer research,
that, to me, me just screams
that these guys are very out of touch.
Very out of touch.
My name is Keith Clohessy.
I'm 35 years old, from Ireland
and I got invested in GME
because of some Reddit post I had read.
Um, I have three small children,
um, and the whole reason I want to be involved
is because I want to make a better life for them,
uh, make things a lot more comfortable and easy.
Uh, I've had a little bit of a hard going
over the last couple of years,
but, um, hopefully, once GME moons, we will...
...be able to build our own house, um,
and basically get all the things
that we haven't been able to afford up until this point.
Melvin Capital continued to short GameStop.
Breaking in massive gains on put options
disclosed quarter after quarter.
For a long time, though,
with the advent of the Internet
and with changing technologies, uh,
GameStop, during the early 2010s,
had a really difficult time
adjusting and adapting to the changing market conditions
that technology had brought in.
This is when the short sellers
had kind of clumped into everything
and slowly just started shorting them into oblivion.
But not everyone shared his bearish view on the company.
Dr. Michael Burry, played by Christian Bale
in Adam McKay's film The Big Short,
took a $6.8 million stake in the company
in late 2018.
By August of that year, he wrote a strongly worded letter
to GameStop's board criticizing their lackluster performance
and taking advantage of GameStop's elite position
in the gaming universe.
Keith Gill continued to post updates on his YOLO,
revealing incremental gains that brought disbelief and criticism
among his fellow wallstreetbets degenerates.
Then, in August of 2020,
as Gill's net worth popped over $600,000,
a savvy young entrepreneur and billionaire, Ryan Cohen,
revealed his own long position in GameStop.
He bought 5.8 million shares of GME,
totaling at $33.9 million.
But this was no ordinary buy-in.
Ryan Cohen, a tech-savvy, fresh-faced millennial
had just beaten Amazon with his wildly successful online pet company, Chewy.
Chewy, say hi to your friends!
Hi, Stela.
He was exactly what GameStop
needed and he knew it.
I'm 33 and, uh, I've, I've learned
- retirement sucks and so...
...you know, maybe I'll start another business. Who knows?
Like Dr. Burry before him, Cohen warned the GameStop board
to get its shit together
or go the way of the dinosaurs.
Oh, this is big news. We, like, legit--
So I, I just got the news. I was out and about.
I was on a walk with my, with my daughter.
I just-- legit-- the first time I've sat at the computer
since I got this news. So let's actually look at the 13th day.
It could get people's attention.
It's like he's building the stake
in his individual capacity.
What's this? H-- how did he-- what's this?
Eight-- okay, so actually, it's a good chunk of volume.
August 18th-- almost 800K.
The governor of growth ha-- has always been free cash flow.
So we've always been very disciplined about that.
You know, the strategy from the beginning,
is really replicating the experience
I had in the neighborhood pet store.
But doing it online and doing it at scale.
And so, you know, doing those small things
like the handwritten holiday cards and the flowers--
That's it. That's uh, I th-- I think it's just funny
that, uh, I didn't know that much about him.
And now I'm like, "Oh, this is a perfect fit
for GameStop, right?"
While Keith Gill was slowly becoming a millionaire,
a revolution was brewing.
Hordes of isolated retail investors
were ditching traditional financial media
and returning to each other
on platforms like Reddit, Twitter and YouTube.
And go.
My name is Matt Kohrs and I'm a YouTube stock commentator.
I could see the midday session
being more of just like a sideway consolidation.
I think a lot of people are waiting
to hear comments from Adam Aron
and to figure out what is going on
with the at-the-market offering.
I, I am not, uh, professionally
or even collegiately taught in the market.
It-- this is for me, reading books, watching videos,
the people I'm trying to help are people who are
trying to make their life better through the market
and they're trying to look for that information.
And some of the times, it's not the easiest thing to track down.
I think what you really watched happen over the last year,
especially, with COVID and quarantine, is education.
Uh, I think high school and college
really failed a lot of people
I was never taught about finance.
I was never taught how to do my taxes.
I was never taught how to invest. I was told,
"Give your money to this guy and fuck whatever you think."
They just tell you, "Invest your money and, you know, be smart."
But how? Like...
...I personally learned this on my own.
I learned it by, by being educated
through social media, not through the news.
Not through my teachers, not, not through big money,
not through the one percenters. They didn't teach me.
And I'm sure they wouldn't have cared if I'd learn or not.
All right, so this is the, uh, the jerry-rig.
I use, uh, I use a very simple setup,
so I've just got, like, a dual monitor,
sort of, uh, you know, s-- computer screen thing right here
and I use my Elgato mic, which, actually, isn't plugged in right now.
But we're gonna, we're gonna pretend it is...
...as well as just a, a standard iBUYPOWER, uh, gaming computer.
I use this just for, uh, you know, streaming. It's, it's nice.
And people get to watch all the shenanigans
and, uh... and have fun,
You know, like, we, like, we like to do.
If I'm not streaming, it's the same sort of thing.
I pull up whatever I want to show on my screen.
I press "start recording" here on OBS
and I can keep track of all this sort of, uh,
things that I want to watch here on, on the, the set up.
But I keep it really simple because I'm just a regular joe.
I, I really don't know a lot about tech.
I think the important thing is the message.
It's, it's what's getting passed along to people
so that we can have a community, have a home,
uh, do a little bit of learning and also have some fun.
Because, 'cause fuck! I mean... we're just regular people, dude.
You like to, you like to have fun while you're, while you're doing
the educating and, and, uh, being a part of the ape community. So--
When I started YouTube, my, uh--
I, I wrote down things that I wanted to get across
and things that were important to me.
And there's a few main things.
Community, empowerment,
education, entertainment.
It's, it's not for me. These, these things
that I put on the Internet are for other people.
Hey, you don't have to be lonely.
You can have enough money to be free.
The two things that I think don't get enough credit,
um, for this retail and Reddit revolution
are memes and the due diligence.
On the Reddit community, I'm better known as ButtFarm69.
I am a meme lord.
A meme is basically anything
that becomes a mimicked thing
throughout the viral consciousness,
especially over the Internet.
This is the worst day of my life.
It's the worst day of your life so far.
So a meme can be a static image
that has a caption on it
and then, uh, the caption will change,
but the picture will stay the same.
Uh, it's basically just anything that can be mimicked
and transfers across society. That is a meme.
So memes have been, for a lot of people,
the thing that got them asking about GameStop in the first place.
Seeing a meme that went viral
on Reddit or on Twitter or whatever,
it was the first gateway
into them learning about GameStop, the stock.
And it made me laugh. Cool.
Now I know the information
and I had a good time learning it.
The memes are so critical
to this movement of information
because they are the-- what interrupts this wall of text,
this wall of information that, otherwise, is indigestible.
It's basically the very opposite of what we did in school,
where we would just stare at a chalkboard for a while.
On a meme, it's like, "Yo, look at this!"
Hi, my name's Sahil. I'm 22 years old
and I'm a final year university student from the UK.
Um, I got involved in the AMC and GameStop saga
when my uncle PayPalled me 20 pounds
and he explained to me what's essentially going on.
And then I started doing my own sort of research into it.
I suppose, you know, I started looking at, you know, other due diligence,
which is put out by other "apes,"
um, in, in-- into the community.
You know, you really start to just gain this confidence
and, um, I just invested more and more heavier, heavily into it,
um, to the point where I sold my Tesla shares
and, you know, all that sort of stuff
and I've more or less, yolo'd my entire portfolio,
um, into AMC and GameStop.
That's literally the only two shares I own anymore.
And it's got to the point where, you know,
my-- even my grandma asks me every single day,
"How, how is your AMC and GameStop doing?"
And, um, you know, she even says to,
you know, when it goes lower, to buy the dips.
- All right. - So the MOASS is
the Mother of All Short Squeezes.
You clearly had a number of, uh, traders
who were anti short sellers.
They thought that the price of GameStop
was being unfairly driven down
and they wanted to do what's called a short squeeze.
So, a short squeeze is essentially,
when you've got shorts that have established positions within the stock.
And if you're a long investor and you're looking for a short squeeze,
you are looking for these guys to buy back the stock
for more money than they sold it at.
Those individuals can hold on to their shares
and not sell them.
Which bids up the stock,
which then requires the short seller
to go in and buy the stock at a higher price.
That can create a feedback loop
of shorts covering positions, which drives the price up
because they're buying from the market,
which shoots the price up exponentially.
People who are long on the stock make a crap ton of money.
As news of Ryan Cohen's buy-in
drove the stock price up, others on Reddit noticed
something unprecedented.
GameStop's short interest.
Uh, guys, there's a 140% short interest on GameStop.
Short interest is the number of shares sold short
but not yet covered or bought back.
GameStop stock was shorted, something like a 140%
of the actual number of shares.
In September of 2020
u/Jeffamazon on Reddit drops a post titled
The REAL Greatest Short Burn of the Century.
In, what now seems like a prophecy of what was to come,
he explains that a short squeeze is imminent.
And as long as retail held on to their shares,
short sellers would have to come to them
to buy them back.
But here's the kicker.
More shares of GameStop were shorted
than existed in the float.
I'll say that again. More shares were shorted than existed.
So how the fuck is that possible?
One explanation is naked short selling.
A naked short sale
is basically when you sell a stock that you haven't borrowed.
Naked shorting is illegal for most firms,
but there is an exemption for market makers.
And those market makers are allowed to sell
without holding those shares to provide liquidity.
Market makers can be-- short the stock
without having
to borrow the shares.
And some people would call that naked shorting.
So when you sign up for a retail broker
and you click "Agree" to the customer agreement,
you agreed to blend your shares out.
So Investor A holds a 100 shares
and Short Seller A comes along
and wants to borrow those shares and sell them.
So that-- the short seller sold the 100 shares,
now they're being held by Investor B.
Investor B wants to lend those shares out
and so, another short seller comes along
and borrows the shares from Investor B
and sells them to Investor C.
And now you have three different investors
who all think they're holding a 100 shares,
but they're all holding the same shares.
And it's legal.
I learned in business school
that one of the most important things that business people do
is try to figure out ways
to get around the current system.
It's like-- it's like a video game, right?
This is when you start to get into the realm
of what's ethical, what's unethical, what's legal, what's illegal.
They can kick the can down the road all they want, but shorts have to cover.
You can't get out of a 140% short float.
Where's GameStop? Up tenfold from the beginning of the year.
Shorts have to cover.
'Cause I'm seeing short squeezes all over the place.
In many cases, they are actually being orchestrated
by motivating young stock buyers.
My son came up to me and he said
he wanted to borrow money.
I asked him a bunch of questions and he said he was on Reddit.
He wanted to follow the memes-- "the meme stocks."
The retail investors have pretty much always been portrayed
as pajama wearing,
no tie owning,
like, bunch of degenerates
who don't know how the markets work
and have no business in the markets.
And I will say to those guys, uh,
"You guys have no business in the markets
because what you've done is bastardize the American economy
and the American markets to do your bidding.
Fuck you."
Right now, an astounding 144%
of GameStop shares have been sold short.
That's far more than there is. That's not right.
- My initial reaction was,
"What are you people doing? This is crazy.
You're going to lose everything. You're going up against the big guys."
And then, since then, the buyers have hit the stock message boards
and urged a gang tackle of the shorts.
GameStop has now doubled in two days.
Right now, we are winning a battle...
- ...with hedge funds...
...market makers,
movers and shakers of Wall Street.
Thirty-two minutes at the hour...
"I've got to say I LOVE,
LOVE what is going on with #wallstreetbets.
All those years of High-Frequency Traders
front running retail traders,
now speed and density of information and retail trading
is giving the little guy an edge."
GameStop at 420!
It, it hit 420, ladies and gentlemen!
When I've been the most locked and shackled
is when I didn't have money to do the things that I wanted to do in life.
Oh, 420.69! Take a screenshot. Take a screenshot!
I just-- I'd really love to buy a house. Obviously, help my family.
Well, what if it's squeezed and this is the life-changing money
and, and you can put your family in places...
...places you always wanted to go?
I saw my account go past $100,000.
Manos de diamante, cabrones.
Diamond hands.
The adrenaline that is pumping through your veins,
I can only compare it to like
it's the final seconds of your basketball game,
you've got the ball, you're dribbling from the other end of the court
towards your basket,
the buzzer's about to go and you just... [whooshes].
You didn't really think they're going to give it to us, did you?
Yeah, I f-- I fucking did.
Well, it's about to get a lot worse.
David, we do have now some statements from Robinhood
and interactive brokers, about restricting trading.
GameStop shares tanking today.
Robinhood and other brokers making it tougher to trade the stock.
We haven't seen how this movie ends,
and a lot of these amateur traders
especially today, could get hurt.
"Our mission at Robinhood is to democratize finance for all."
Uh, people upset at the idea that they can no longer buy.
And it will have an impact.
I remember January 2021.
I remember all the hope that we felt.
And you can call us misguided,
you can call us juvenile,
but the fact is,
we were right.
We saw a chink in the armor and, for once,
we cut the oligarchs on the back foot.
We were so close...
...and we know that money can't buy everything.
But it can buy you freedom.
Medical bills, parking tickets, late fees, overdraft charges,
rent hikes, student loans, stagnant wages,
cost of living, inflation,
are all realities that keep us chained
to the gig work and the hard labor
that keeps the real economy right where it should be.
Stuck in the cogs of a bastardized financial system,
deranged into a perfect cold machine
rigged to extract wealth from the hardworking people of the world.
And as GameStop popped to more than $500,
with no sign of slowing down,
that excitement was a rare feeling.
After a year of pandemic and isolation...
...all we had to do was buy and hold.
Who knew that our markets were so fragile
that buying and holding a stock could take down the whole damn thing?
The keys to the castle were in our hands.
And when the excitement reached to boiling point...
...our brokers betrayed us.
Robinhood, the broker that we had trusted
to democratize finance,
took away the "Buy" button.
Then E#TRADE, TD Ameritrade, Webull,
and other payment for order flow brokers followed suit.
We didn't know why buying was halted on AMC and GameStop.
But the message was clear,
Wall Street wanted us to sell.
And what should have been the Mother of All Short Squeezes
became little more than a sneeze.
It seemed to everybody that the apes had lost.
And once again, it was abundantly clear...
...that the house always wins.
- This is the fun part.
This is where the training comes in. All right, sit.
Stay.
Go get it!
Bring it!
There's no doubt that the-- it's the retail investors
who spotted this crazy set of circumstances
in which something could squeeze like this
and they got it right.
They went all in,
and then it was the retail investors that were hurt.
Uh, which is, again, sort of
the, the standard on Wall Street
that gains are privatized
and losses are socialized.
This hearing is entitled
Game Stopped?
Who Wins and Loses
When Short Sellers, Social Media,
and Retail Investors Collide.
This is what I, I think needs to be answered
about your decision.
Why did Robinhood restrict the buying
but not the selling of GameStop?
The decision to restrict GameStop and other securities
was driven purely by deposit
and collateral requirements imposed by our clearing houses.
So let's break down Vlad's excuse
for turning off the "Buy" button.
- Every time a trade happens,
it goes through the DTCC,
or Depository Trust Clearing Corporation.
They keep track of who owns and who owes what.
They're sort of, like, the officiant of the marriage.
They make sure that
the person who's selling the stock has a stock,
and the person who's buying the stock has money.
The DTCC called Robinhood
to ask for three billion extra dollars
to back up the buying activity in GameStop and AMC.
They told Robinhood,
"Hey, we need three billion dollars in, essentially, collateral from you,
in case these trades don't go through so that you can cover it."
So Vlad, in true bad-guy form,
decides to protect his company over his customers
by proposing giving the DTCC less money
if he shuts down the "Buy" button.
They agreed.
It's important to remember, though,
that any one story about what happened in January
is only ever going to be part of the picture.
I believe that retail investors
are being used by the broker-dealers
and, and they are the product.
And that, of course, is what's going on
with payment for order flow
and high-frequency trading firms,
uh, that claim to be market makers,
when, in fact, what they're really doing
is engaging in market activities
to maximize their profits.
Period. Full stop.
The people at Robinhood
have got fabulously rich over this.
The two principal founders of Robinhood
are reportedly billionaires today.
Their wealth depends upon being able to sell
as many trades as possible
to the Citadels of the world,
that then get executed in dark markets,
which maximizes the amount of payment for order flow
they can give to the Robinhoods of the world.
The Robinhood customers
not only enriched preexisting billionaires,
they have actually created more billionaires.
We all love a good David and Goliath story.
And, yeah, it was awesome
to watch the little guys smash some hedge funds.
But the reality is a lot more complicated.
As retail investors loaded up on GameStop and AMC,
Robinhood was making a killing
through payment for order flow.
And Citadel was making even more
by taking retail orders.
Melvin Capital, on the other hand, wasn't so lucky.
Over the course of the run-up in January,
Melvin reported losses to the tune of $7.5 billion.
And this is where things get a little bit weird.
See, market making isn't the only business
Ken Griffin and Citadel have their hands in.
Citadel is also a hedge fund.
And as Melvin Capital was on the brink of collapse,
Ken Griffin used that hedge fund to bail them out.
Again, I have not, nor do I have
the ability to subpoena emails
or trading records or phone calls
or who knew what, when and how.
But the only reason,
the only reason
Citadel and Ken Griffin would give Melvin a dime, given his state,
would be that, in their view,
Melvin represented such risk
that further destruction of Melvin
in the GameStop/meme stocks
would put a very, very, very overleveraged Citadel at risk.
That would be the only reason
to get the bleeding at Melvin to stop.
Because, by all practical purposes,
Melvin is a weak, irresponsible market player.
And Melvin should have gone out of business.
When Robinhood turned off the "Buy" button,
that benefited
a few significant players
on Wall Street.
Particularly, Melvin Capital,
but some of the other short sellers.
It's important to point out here
that it wasn't just Robinhood who restricted buying,
but all the brokers who did had one thing in common,
payment for order flow.
These events have eliminated
potential conflicts of interest
and the predatory ways that certain funds operate
and they have demonstrated the enormous potential power
of social media in our markets.
The long knives have come out
shutting down the investing revolution
the elites could not control.
The biggest disappointment comes from Robinhood.
Here to testify today,
including witnesses representing Wall Street firms
Melvin Capital
and Citadel.
You said that... you didn't talk to anybody
of Citadel, Citadel Securities.
Did anyone in your organization,
since January 1st, contact Robinhood?
Absolutely not.
There is evidence
that's come out
that there was communication
between Citadel and Robinhood.
It was highlighted, uh, by this internal chat message
on January 27th, where Robinhood President Jim Swartwout said,
"You wouldn't believe the convo
we had with Citadel. Total mess."
- Uh, you know, maybe they chose the trading restrictions...
...because that's good for Citadel.
It-- crime does pay.
If you're a broker-dealer, crime pays.
It-- that's just the truth. You pay fines,
but it is the cost of doing business.
I'm going to do something I never do.
Let's come out of my shell and talk about
how I'm sick of injustice.
I'm sick of people bowling...
...people who are trying to be smart with money...
...and make something out of themselves,
who don't buy themselves anything,
who try to put money aside
to make a better future for their kids.
When I think of these big hedge funds and firms
that are betting against the economy,
the US economy, the American investor,
the ape is bullshit.
If you have privilege
and you are not actively and consciously
using that privilege to bring good
into this world, you are part of the problem.
I'm so frustrated. I sit here every day
and watch these people bullshit everybody.
I have a message for all of these sort of guys.
You don't represent retail
and that nobody believes you anymore.
You should not bet against America.
You should not bet against the economy.
You should not bet against the little guy
because you're going to get kicked in the ass.
And just because we've got you by the balls
and you don't know what to do and you don't know how to stop,
it doesn't mean that we're going to stop.
And I'm sick of it! Let's have equality.
We're not going anywhere. We're not fucking leaving.
We may not know everything, but every day we're learning more.
That's what an ape feels.
Show me some goddamn respect
for even taking attempt to get in the market!
Show me some goddamn respect for actually doing something
that somebody told me I couldn't do.
Show me some goddamn respect...
...for betting on me.
I thought that was the American dream.
Underpaid, understaffed, overworked.
How many of us does that describe?
The sweat... that I put out,
I have a right to earn.
So the same shit that happens
in 2008 will continue to happen
and is happening right now.
We let the news stop
being the news. Think about this.
When was the last time
you trusted the news to give you
factual, unbiased, objective information?
This is a pure underdog story.
The 99 versus the one, David versus Goliath.
You're having the average person,
who's locked in solitude during the pandemic,
fighting against the illegitimate acts on Wall Street.
I don't give a damn how long you've been trading,
how long you've been doing something,
if you come in disrespectful,
I'm going to give you, in like kind,
what you just gave me.
Because you're thinking I'm not sophisticated enough to learn
one plus one is two?
Fuck you!
Fuck your vanity space projects!
Maybe it's time the people got the keys to the rocket.
What I would like to point out here
that we have come dangerously close
to the collapse of the entire system
and the public is-- seems to be
completely unaware of that,
including Congress and the regulators.
I think that common bond
that was born out of January 28th
was the recognition that that opportunity
which had been looming larger on the horizon...
Right? We, we have this. We have the theory.
We have our investment.
The timing is right. Everything is right.
We're doing this. And then the carpet was pulled.
As the stocks plummeted, the apes refused to sell.
Instead, they held on and dug
- into SEC filings, financial disclosures... - There you go.
...congressional hearings, you name it.
They were intent on finding out who was behind
Robinhood's decision to shut off the "Buy" button.
Someone would put out an idea
and that idea would be
subject to critique,
um, to acclaim,
to be built upon.
And what happened out of that
was the birth of almost a hive mind.
And the second I looked into Citadel, it was like,
"There is something very different
from the normal... like, investor mentality."
By the end of 2008,
we had lost half our capital.
Citadel has acted irresponsibly
since the GFC of 2008.
Whatever the financial accident is,
Ken Griffin and Citadel need to get
a backdoor bailout by the government.
And each thing we did bought us one more day.
And day by day, we bought ourselves a future.
One of the difficulties in our system,
something that we permit, we, we allow legally,
but that is hugely problematic,
is that a single entity
can have conflicting roles.
One example is,
Citadel can be trading for itself
and at the same time be a market maker.
I think they're better known as high-speed speculators.
And that's all they do. Um, they don't provide liquidity.
They're not here serving as traditional market makers.
That's where the, the real harm can come.
From learning what's going on in retail
and then using it for your own benefit.
They're here taking bets, actively taking liquidity
and trying to find inefficiencies at extremely high speeds.
This is a situation that would
permit a Citadel, for example,
to be able to really take advantage.
of the markets
and be able to drive the price down
by using its privileged position
as a market maker
to do naked shorts.
That is a possibility.
With this payment of order flow,
you create this black box situation
where no one really knows what's going on.
And if you're paying 300 million
for that kind of flow,
you must be making your 300 million back
and then some from it.
So there's no other industry
where you can sell something...
...take someone's money and give them nothing.
I turned my attention,
you know, towards the fails to deliver
as the core issue.
Because it is built
into the regulations to allow it to happen.
So a failure to deliver is when you take a share
and you sell it short into the market.
You're supposed to come back
at a later date because somebody wants their bag of sugar back.
But if you are unable to find a bag of sugar to buy
to give back to that person or the price is too high
and you don't want to pay that price, you fail to deliver.
This is something that a lot of investors have looked at
because there were a crazy high number
of fails to deliver on the GameStop stock.
If I buy a bag of sugar from you
and I give you my money for that bag of sugar,
I expect you to give me the bag of sugar.
I don't expect you to say,
"I'll get it to you when I can."
I, I don't think there's a benign explanation
to high levels of short interest
that results in large numbers of failure to deliver.
To see four or five times
the float trade in a day
and then to happen day after day,
those trading numbers, the volumes are unprecedented.
Brokers are selling stuff they don't have.
They don't have it to deliver. They can't borrow it
'cause it's all borrowed out.
Couple that up with the fact
that more than the float was short
and how much of that was really
firms that were short,
that created counterfeit or synthetic shares
and failed to deliver those shares
and therefore led to a huge amount of supply,
of oversupply of GameStop shares in the market in January.
And yet, the brokers were allowed to continue to sell the stock.
They were allowed to take your money
and give you nothing.
Here's a mindblower for you.
You don't actually own any of your shares.
Your broker does.
So when you buy a share of GameStop, let's say,
through a broker like Robinhood,
the DTCC transfers that ownership to your broker,
not you.
So let's walk through everything
the apes have learned with an example.
You want to buy a share of GameStop.
Robinhood's supposed to find you the best deal, but they don't.
They sell your order to Citadel.
Then Citadel, acting as a market maker,
doesn't bother to locate a share for you to buy...
...because, as a market maker, they don't have to.
Next, your trade goes to DTCC,
where they transfer ownership to Robinhood.
But when it's time for your trade to settle,
Citadel fails to deliver your share,
creating a phantom share.
Then, Robinhood lends that phantom share
to Melvin Capital who takes a position
against you in the stock
with your own share.
The apes decided to fight back.
They did something any one of us can do.
They pulled their shares out of their brokers hands
and registered them directly in their own names.
When people are registering more and more,
it does seem to cut down on FTDs, fails to deliver.
If you do a DRS, they're not going to lend it out.
So if you don't want your share shorted,
that's kind of one way to guarantee it.
In September of 2022,
GameStop revealed that the apes had directly registered
an unprecedented 71.3 million shares of GameStop,
pulling them out of the hands of their brokers.
So on top of this being really complicated
- and convoluted... - Yeah?
...it just seems like people are doing whatever they want.
I mean, yeah, that's the problem.
They are just doing whatever they want.
The financial industry has used its economic power
to buy political power.
The SEC was formed
as a result of the Great Depression.
Congress then determines how much money the SEC gets.
What a pickle!
You know? Do you want to be biting
the hand that feeds you?
'Cause the political reality is that billionaires
tend to set the agenda and have an outsized influence on regulation and legislation.
In the 1930s, when the SEC was created, they didn't have the Internet.
They didn't have quick access to information.
So they made a system of self-regulation.
And almost a century later,
we still have that same system.
And that system is led by FINRA,
a private organization
tasked with regulating brokers
and broker-dealers.
But here's the catch.
FINRA is funded and guided
by its member firms,
who it's supposed to regulate.
Citadel and Robinhood among them.
So, in my view,
I think we're past the point of no return.
I, I-- we're in a regulatory crisis
where Wall Street and Washington
are in this suicide pact that they are going to ride
this self-regulatory system to the death
and there's nothing that's going to make them admit
that the system they're supporting is flawed
and, in fact, is damaging the economy.
We looked at as many
of the major legal actions
as we could find publicly
against the six biggest banks
in the United States over 20 plus years.
And it shows that they have paid
hundreds of billions of dollars in fines
for breaking the law over and over and over.
I don't mean parking tickets.
I mean manipulating markets.
Inaccurate reporting of a short sale indicator,
$180,000 fine.
Trading ahead of active customer orders,
$700,000 fine.
Failed to close
a failure to deliver position,
$10,000 fine.
$15,000 fine.
$30,000 fine.
$80,000 fine.
Major market manipulation between 2007 and 2010,
$22,668,000 fine.
This is just for Citadel Securities.
These are just nine that I picked
to prove a point on an article.
Tell me this isn't a systemic problem.
What happened in January 2021 was unprecedented.
David took a shot at Goliath and, for once, got a hit.
But what the mainstream media has failed to acknowledge
is that this isn't over.
Like, it looked like a short squeeze.
It had all of the visual effects
of a short squeeze,
but, in fact, it didn't force
the shorts to cover, did it?
We, we just don't have the disclosures and transparency
to know what's taking place in,
you know, in the short side of the market.
They can use different techniques
to offset short positions.
If there's anything we've seen, uh, be true
throughout all of time on Wall Street,
it's that, you know, manipulation will find a way,
and it will find a way
in the dark corners of the market
that regulators aren't looking at.
The apes have pulled back the curtain
on decades of deregulation,
consolidation, overcomplication,
and incentivized criminality on Wall Street,
that have left us with capital markets,
designed to extract wealth from mainstream
while giving everyday people the illusion of true participation.
It feels overwhelming.
But unless we come together and demand change,
we will continue to be the product.
People often say,
"How can you possibly make any progress,
given that Wall Street has an army in Washington?"
You don't have to go man-to-man with these guys.
You will be amazed
at what a difference
even a couple of people can make
if they participate in the process.
Wall Street wins
largely because they are unopposed.
We need to get to a point where there's enough attention
on a specific issue, a specific piece of it,
that you can get some real regulatory change.
And I think regulators have missed the fact
that this community has become more sophisticated
over this past year and,
and the level of sophistication has gone from,
"I'm buying stocks on a phone,"
to "Let me explain to you the problems
and conflicts of interest at the heart
of the self-regulatory system," right?
Like, people understand market structure now
and they understand, uh, the flaws in the system,
and we-- you know, the industry and regulators
need to approach them
as, uh, well-educated peers at this point
and not condescend to them.
This is a, a significant development
in our capital markets.
It's a significant development in Wall Street
and it's different than previous movements
because it started with dollars.
And, and that's what got the attention of Wall Street.
So I-- my hope is that it will continue,
and I certainly am pivoting
in the way that I think about advocacy because of the apes.
I think it's hard to, to stereotype
the ape community, um, and to generalize about it.
In fact, I, I, I'm continually impressed
at the diversity in the community
and I think that that's something that should be, um, focused on
rather than, you know, this caricature,
uh, of the, the basement-dwelling market manipulator.
Oh, I'd be proud to call myself an ape.
My mom is from Tunisia and, uh, she's already working
over the retirement age now
and she has a hard work.
Uh, she's a single-- she's a single mom.
Uh, the, the rent here is pretty expensive
and we're somehow living on the edge.
I saw this as a great opportunity
to invest in my future and my kid's future
and just being able to be financially secure
and not having to work 12-hour shifts.
Um, but I'm a nobody, really.
Um, I, I'm a guy who just needs a win.
I want to have my own home.
And I just-- and I want to be able to repay my parents too
for what they've done for me.
It would be r--
it would be a much better world
if everyone was able to...
...take advantage of their talents
and really help themselves and their families prosper
in the way that they know that they can do and to,
to pick up their heads.
If you can dream it, you can achieve it.
And if you're stuck in a situation
where you feel like nothing is going your way,
nothing is being done to make sure that your life is better,
take a bet on yourself.
And to hell be damned, let nothing stop you.
You control yourself.
You are not the product.
So as long as they fight, we fight.
As long as they hold, we hold.
Keep surviving, keep making ways out of no way,
keep taking one step forward.
Because at the end of the day, they would eventually get tired.
We won't. Because we've already lived this life.
I grew up in a housing project in Worcester, Mass,
on free school lunches,
uh, food stamps and welfare.
I had nothing.
And I got lucky, I went in the Air Force,
I got to Harvard Law School,
I got a partnership at Skadden, Arps.
And I worked in the United States Senate.
And it's long past time
that Washington stopped working
for the rich, the wealthy,
the big Wall Street firms and the lobbyists
and get back to the business
they are supposed to be here for.
I grew up learning about
superheroes doing the right thing,
about standing up to the bad guys,
about being courageous in the face of adversity.
I guess I just latched on
to that idea that we can be superheroes.
It's important to keep yourself grounded in what fuels you,
what keeps you going, what makes you feel like
you, you're making a difference in your life and in your family's life.
Keep putting your nose to the freaking grinder because there are opportunities.
Learn by failing forward, learn by leaning on your people
and learn by remembering that people are always first.
They don't know nothing about this life we live.
They're not regular people.
I wish that they understood that there's a person
behind every zero and every comma
that they go and check in their bank accounts every day.
So, to every ape that's holding whatever stock you're holding,
keep holding until you get what makes you satisfied.
There is no number.
There's always a cross to bear,
there's always another bridge to go across,
but at the end of the day, it's your cross
and as long as you're holding, I'm holding.
♪ Oh no, the MOASS can't stop ♪
♪ And them hedgies all get fucked by the GameStop rocket ♪
♪ Community indivisible Still attack pathetic ♪
♪ Them Citadel interns So pitiful up on Reddit ♪
♪ The horse, the deadbeat And the deep young contestant ♪
♪ You've never seen a group of people ♪
♪ So happy that they invested ♪
♪ Them shorts, they all crying ♪
♪ Them tears, they so tasty This is GameStop ♪
♪ Some number 20 Can he hate me? ♪
♪ It's all groovy, baby We bringin' down the mafia ♪
♪ We steamrollin', they movin' Oops, no stopping ♪
♪ Yes, you sell a box This indicating he's nuts ♪
♪ So give you the teabag Don't go in the teacup ♪
♪ So keep up Ain't slowing down ♪
♪ Till it's over, we told them to never tread on us ♪
♪ They dancing on a cobra Bernie Madoff, move over ♪
♪ The king of crime is coming to a jail near you ♪
♪ He a flight risk Keep running ♪
♪ Short hedge funds targeting your company ♪
♪ With a prime broker to sell a box to bankruptcy ♪
♪ They use media journalists as a weapon ♪
♪ Aimed at American business They homewreckin' ♪
♪ Think for a second Don't read up on DD ♪
♪ You don't gotta believe what they saying on TV ♪
♪ 'Cause they paid off And then pocket the candy ♪
♪ Hear a calm revolution The money, they ain't ready ♪
♪ The meme so deadly The meme lords are generals ♪
♪ Them shorts getting fucked by these hentai tentacles ♪
♪ The apes so heretical Media call 'em blasphemy ♪
♪ Ride upon a bubble 'Bout to be victim of gravity ♪
♪ The faux reality manufactured in spin alley ♪
♪ Regulator totally absent Looking like Death Valley ♪
♪ So thirsty for just a drop of the justice ♪
♪ The silence discourse The media won't discuss this ♪
♪ Cause they want to work Monday They enforce the narrative ♪
♪ They're using propaganda to terrorize the terrorists ♪
♪ So imperative now common Americans are so confused ♪
♪ They look to the news That's where the error is ♪
♪ Because the news is owned by the few ♪
♪ Conglomerators grip You're fed or feed into ♪
♪ From these evil-ass dudes Just pigs and humans sew ♪
♪ So your ass get the boots No longer taking abuse ♪
♪ Paid off, sending these buyable politicians ♪
♪ Only steel apes to further the moon mission ♪
♪ Better blow a whistle You're organized ♪
♪ You're criminal Caught red-handed ♪
♪ And still going You're pitiful ♪
♪ Jail cell minimal price for one share ♪
♪ Because I ain't selling none of 'em if candy ain't there ♪
♪ So you better brace for impact ♪
♪ The system you were born by ♪
♪ The apes Choose to ignore the wisdom ♪
♪ Diamond hand apes In the war against bears ♪
♪ The market makers manufacture counterfeit shares ♪
♪ An endless supply, they call it making short selling ♪
♪ While they pay for negative opinion so you come chillin' ♪
♪ Wall Street bets taking over by the hedgie ♪
♪ So we move the GME then superstonk for the tendies ♪
♪ The fun can be so deadly but my hands polished diamonds ♪
♪ So the shield's up, titles of the hedge funds crying ♪
♪ We hold the lending, buying While Ryan tweeting a Cypher ♪
♪ Hittin' Ken with a Hadouken I'm Ryu from Street Fighter ♪
♪ That market manipulation from hedgie heavy hitters ♪
♪ Consistent of many methods hiding failures to deliver ♪
♪ They send it overseas And hide them in the auctions ♪
♪ But what margin calls ringin' black rockets in the auction ♪
♪ Go ahead and tank it We lovin' buying the dips ♪
♪ Got the diamond hand ape Bought me jack to the tits ♪
♪ Hedgies keep lying They bleedin' out dying ♪
♪ Attempt to make us paper hand Like, keep trying ♪
♪ Power to the players Now the players got the power ♪
♪ Queen Kong joined the army With our Winston David Lauer ♪
♪ So many lit up towers At four o'clock in the morning ♪
♪ Got me checking Reddit steadily ♪
♪ Your day is never boring ♪
♪ Avoiding every post of legitimate due diligence ♪
♪ The super storm got me Disciplined hard militants ♪
♪ We growin' in intelligence Our brain formin' wrinkles ♪
♪ By the shape-shifting still ♪
♪ I smell your shit through the sprinkles ♪
♪ Citadel and co picked the wrong fucking battle ♪
♪ We King Kongs climbing on top of Tower of Babel ♪
♪ We laugh at short ladders posting thanks for the sales ♪
♪ Squeeze the snazzy But then your body ♪
♪ Surfing with the whales ♪
♪ Keith Gill chillin' just chucklin' at the shilling ♪
♪ While the world realizing Ken Griffin final villain ♪
♪ The Citadel building Soon going out of business ♪
♪ Got the world waiting for that MOASS early Christmas ♪
♪ Apes going Rambo Superstar commando ♪
♪ Buying every naked share And asking when Lambo ♪
♪ Bo, bo, bo, bo... ♪