DOJ to soon take action on short-selling

5/26/2023

Per Reuters

A top department official of the Department of Justice said they would soon be taking action on short-selling. It was noted that this will be a "key focus for US prosecutors."

Short-selling allows people to profit even if a stock goes down. For example, if a person placed a short-sell on a stock at the price of $100 if the stock fell to $90, the person would have profited from the $10 difference.

Now, the DOJ wants to investigate short-selling further after the situation with US regional banks. After the stock market's performance in 2021, criminal prosecutors and regulators started looking more into short selling.

Avi Perry, the chief of the market integrity team, also specified that short selling includes options. It was also confirmed that this was now a priority for prosecutors.

Perry: “You’ll see some more activity from us involving short sellers sometime in the next few months,”

Potential manipulation by short sellers and hedge funds has been a topic of investigation by the DOJ and the US Securities and Exchange Commission. The investigation has been going on since at least 2021.

Recently, JPMorgan CEO Jamie Dimon shared his thoughts on a short-selling ban on banks, saying that regulators should look into it. He said that the SEC could look into what people did by name in options, derivatives, and short sells to see if they were doing something wrong.

He said that if people involved in short selling did something wrong, the SEC should go after them. Dimon noted that if someone was going short and tweeting about a bank, the SEC should "go after them."

In April, Elon Musk said that Tesla would go after Wall Street short-sellers and certain law firms. In February, it was announced that the company would be building its own legal team.

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Reuters