- Sen. Elizabeth Warren and AOC slammed hedge funds who criticized the GameStop traders.
- Both say Wall Street investors and hedge funds have long treated the stock market like a casino.
- Redditors on a popular subreddit are driving shares of GameStop higher, sending the stock price soaring.
- Visit Business Insider's homepage for more stories.
Sen. Elizabeth Warren of Massachusetts slammed hedge funds and investors who were criticizing the traders driving up GameStop stock, saying they've treated the stock market "like their own personal casino" and calling for stricter regulations.
"With stocks soaring while millions are out of work and struggling to pay their bills, it's not news that the stock market doesn't reflect our actual economy," Warren said in a Wednesday statement. "For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price."
Warren, a 2020 presidential candidate and one of the nation's leading experts on bankruptcy and consumer-protection law, added: "It's long past time for the SEC and other financial regulators to wake up and do their jobs - and with a new administration and Democrats running Congress, I intend to make sure they do."
The progressive Democratic Rep. Alexandria Ocasio-Cortez of New York echoed Warren's sentiments, tweeting on Wednesday: "Gotta admit it's really something to see Wall Streeters with a long history of treating our economy as a casino complain about a message board of posters also treating the market as a casino."
Earlier this month, a group of traders on the popular subreddit r/wallstreetbets decided to buy shares and options of the video-game retail store GameStop en masse on platforms like Robinhood and Ameritrade, which sent the stock price of the struggling retailer soaring nearly $350 a share as of Wednesday afternoon. The stock was as low as $3 to $5 a share in the summer before it rose to under $20 at the beginning of this year.
The huge rally of GameStop stock has made countless Redditors huge profits (at least temporarily) and caused major headaches for big hedge funds and investors who were also shorting GameStop's stock.
The "Big Short" investor Michael Burry was among the biggest names criticizing the day traders driving up GameStop's price, calling the surge "unnatural, insane, and dangerous." Nasdaq CEO Adena Friedman said the exchange could halt trading if it noticed a connection between discussions on social media and volatility in a certain stock. One hedge fund, Melvin Capital, was down 30% for the year as of Tuesday because of its short positions on GameStop.
Insider's Ben Gilbert and Allana Akhtar recently reported the GameStop-buying Redditors on the forum were driven by a number of motives, including GameStop looking like a more promising investment at the very beginning of the year, partly because of Chewy cofounder Ryan Cohen joining the company's board and buying a 12% stake in the retailer.
Even more potently, Reddit traders also appear motivated by a desire to publicly embarrass and get under the skin of the big firms and investors shorting GameStop, particularly Melvin Capital and the Citron Research investor Andrew Left, who has feuded with and poked fun at the traders on Reddit at certain points.
While some commentators have said the rush to buy GameStop is just a way to "meme-ify" a stock or a populist revolt against the big Wall Street firms and investors who run the markets, others, like Insider's Linette Lopez, said the GameStop surge could be a more nefarious scam or grift on the Redditors led by more experienced options traders.
Some traders have also begun helping revive the stock prices of other frequently shorted stocks, including AMC, Bed Bath & Beyond, Blackberry, Koss headphones, and Nokia.