Texas AG Paxton, SEC, announce plans to investigate GameStop market turmoil

Texas Attorney General Ken Paxton announced on Friday that his office will be investigating the trading platforms and hedge funds involved in restricting access to trading in stocks such as GameStop that roiled the markets so dramatically this week. 

The Republican AG tweeted that "Today I'm launching an investigation into [trading platform Robinhood] and hedge funds who rigged our free [market] for the benefit of Wall St elites," according to the Epoch Times. "The US econ should be transparent, open. This week's coordinated corruption by a cabal of oligarchs shows it isn't. I’ll help fix that." 

In a press release from the Texas AG's office, Paxton issued 13 Civil Investigative Demands (CIDs) to companies including Citadel, TD Ameritrade, TD Bank, and Robinhood "regarding the prohibition of certain stock purchases."  

"Wall Street corporations cannot limit public access to the free market, nor should they censor discussion surrounding it, particularly for their own benefit," said Paxton. "This apparent coordination between hedge funds, trading platforms, and web servers to shut down threats to their market dominance is shockingly unprecedented and wrong. It stinks of corruption." 

The Securities and Exchange Commission (SEC) also weighed in, saying in a statement that it was working closely with other regulators and stock exchanges "to protect investors and to identify and pursue potential wrongdoing."  

It was a chaotic week for the stock markets, particularly for hedge funds and other short sellers. The Epoch Times reported that "GameStop short-sellers endured mark-to-market losses of $19.75 billion so far this year, according to S3." 

GameStop emerged this week as the hottest stock in the markets when investors on the Reddit platform pushed up the price of the stock in response to hedge funds trying to push down the price. The long-term implications of this challenge to the titans of Wall Street won't be known until the Texas AG, the SEC, Congress and others investigate and act on their findings.