Wall Street, Will 'Daejanggaemi' Roaring Kitty Trading Be Blocked... GameStop Stock Soars Again

E*Trade, a stock trading platform under Morgan Stanley, is considering blocking the trades of 'Roaring Kitty,' an individual investor who led the 2021 'meme stock' craze. On Monday, the 3rd (local time), GameStop's stock price surged 21% after Roaring Kitty disclosed an investment portfolio that included a significant amount of GameStop shares.

[Image source=Reuters Yonhap News]

The daily Wall Street Journal (WSJ) reported, citing multiple sources, that Morgan Stanley and E*Trade are examining whether the actions of Keith Gill, who operates under the 'Roaring Kitty' account, constitute stock price manipulation or are legal. Due to growing concerns about stock price manipulation related to recent GameStop option purchases, internal discussions are underway about potentially blocking his trades altogether. However, no decisions have been made yet, and WSJ added that it is also possible that no action will be taken.

Keith Gill, known as the 'chief ant' who led the 2021 GameStop incident, was confirmed to have made large purchases of GameStop options through the E*Trade platform just before announcing his return on social media on the 12th of last month. Then, about three weeks later, on the previous night, he also shared a screenshot of what is presumed to be his E*Trade account. The portfolio included 5 million shares of GameStop and 120,000 call options expiring this month.

The market immediately reacted. GameStop's stock price showed double-digit gains in pre-market trading before the New York Stock Exchange opened on the 3rd and closed the regular session up 21%. Since Roaring Kitty posted an image announcing his return on social media last month, GameStop's stock price has surged by more than 60%. After the market closed that day, he also posted an updated screenshot on Reddit showing that his portfolio was valued at over $289 million.

Individual investor Keith Gill, active under the account name 'Roaring Kitty'
[Image source=AP Yonhap News]

Wall Street is concerned that the 'chief ant' Roaring Kitty might act to benefit himself. A source said, "Morgan Stanley has been monitoring his E*Trade account for about three weeks before Roaring Kitty announced his return," adding, "He purchased call options before tweeting, some of which expired that week. This suggests he likely profited from the stock price fluctuations triggered by his tweets."

Authorities have also taken action. The Massachusetts securities regulator confirmed in a spokesperson statement that an investigation into Roaring Kitty's activities is underway. The U.S. Securities and Exchange Commission (SEC) is also closely examining call option trades around the time Roaring Kitty's posts were made. WSJ highlighted Roaring Kitty's influence, noting that his followers on X (formerly Twitter) have grown to over one million, and many investors are flocking to GameStop without considering its fundamentals due to his presence.

However, if Wall Street moves to restrict Roaring Kitty's trading, there are concerns about backlash from retail investors who invest in meme stocks. WSJ analyzed, "Platforms generally have broad authority to close customer accounts at their discretion," but "Morgan Stanley faces a delicate choice." Earlier, during the height of the meme stock rally in early 2021, when platforms including Robinhood restricted GameStop trading, Reddit investors who followed Roaring Kitty as their leader strongly protested.