Motivated as much by revenge as by profit, these influencers in the group encouraged the 2.7 million members (since risen to around 8 million) to purchase the stock in order to drive the price higher and create a massive short squeeze. This quickly became a movement with a cause similar to that of Occupy Wall Street, except much more effective because it hit the intended target where they would feel it the most, in the wallet. “The only way to beat a rigged game,” one WallStreetBets leader said, “is to rig it even harder.”
GameStop stock, which closed at $17.69 a share on Jan. 8, shot up to $347.51 by the close last Wednesday. With combined losses of almost $20 billion, hedge funds were on the ropes and close to bleeding out, selling their longs in an increasingly futile effort to cover their shorts.
GameStop stock, which closed at $17.69 a share on Jan. 8, shot up to $347.51 by the close last Wednesday. With combined losses of almost $20 billion, hedge funds were on the ropes and close to bleeding out, selling their longs in an increasingly futile effort to cover their shorts.
One fund, Melvin Capital, lost over half its value and had to be bailed out by hedge fund sugar daddies Ken Griffin (Citadel) and Steve Cohen (Point 72). Another fund, Citron, was teetering on the brink of collapse. All this outsider army needed to win was the continued ability to communicate with each other online, and their collective ability to keep piling into the “Buy” side of the trade. Within hours, they would be hobbled on the first front and crippled on the second.
The Empire Strikes Back
First, the digital distribution platform Discord banned the WallStreetBets account after the close Wednesday for “hate speech, glorifying violence, and spreading misinformation.” (For a moment, it looked like Reddit had also banned the group, but they resisted pressure to do so.) If the quoted justification sounds familiar, it’s nearly identical to the one given by Google, Apple, and Amazon for deplatforming Parler just three weeks earlier. Echoing Amazon, Discord said it had sent the group repeated warnings about objectionable content before deciding, on that day of all days, to shut them down.
Meanwhile, WallStreetBets investors were locked out of their trading accounts by online brokers such as Robinhood on Thursday morning. Based on new collateral requirements that it says were imposed by an industry consortium, Robinhood forbade its users from buying GameStop and other stocks that WallStreetBets had identified as short squeeze opportunities. Users were allowed only to “close their positions”—in other words, to sell to the shorts desperate to buy. When angry users registered their disapproval by leaving over 100,000 one-star reviews of the Robinhood app in the Google Play Store, Google deleted them.
Normal trading was allowed to resume Friday, but the hedge funds used their 24-hour sole ownership of the battlefield to fortify their positions, covering the most vulnerable shorts. Wall Street then sent in reinforcements, as new short positions were taken at these high price levels, virtually guaranteed to pay out when, inevitably, the air leaks out of the balloon.
First, the digital distribution platform Discord banned the WallStreetBets account after the close Wednesday for “hate speech, glorifying violence, and spreading misinformation.” (For a moment, it looked like Reddit had also banned the group, but they resisted pressure to do so.) If the quoted justification sounds familiar, it’s nearly identical to the one given by Google, Apple, and Amazon for deplatforming Parler just three weeks earlier. Echoing Amazon, Discord said it had sent the group repeated warnings about objectionable content before deciding, on that day of all days, to shut them down.
Meanwhile, WallStreetBets investors were locked out of their trading accounts by online brokers such as Robinhood on Thursday morning. Based on new collateral requirements that it says were imposed by an industry consortium, Robinhood forbade its users from buying GameStop and other stocks that WallStreetBets had identified as short squeeze opportunities. Users were allowed only to “close their positions”—in other words, to sell to the shorts desperate to buy. When angry users registered their disapproval by leaving over 100,000 one-star reviews of the Robinhood app in the Google Play Store, Google deleted them.
Normal trading was allowed to resume Friday, but the hedge funds used their 24-hour sole ownership of the battlefield to fortify their positions, covering the most vulnerable shorts. Wall Street then sent in reinforcements, as new short positions were taken at these high price levels, virtually guaranteed to pay out when, inevitably, the air leaks out of the balloon.
Faced with a game that, for once, they couldn’t rig in their favor, it appeared that the insiders tipped the board over and started a new game. As a massively decentralized online group of scrappy outsiders, the only tools at WallStreetBets’ disposal were online trading and social networking. Both were frozen at the crucial moment, and the hedge fund insiders were let off the hook. The weaponization of censorship is a big part of the reason why.
Down the Slippery Slope
Some of us warned of a slippery slope when Parler was taken down and a sitting president was systematically ghosted from every online speech platform. But we could not have foreseen how slippery the slope would be, or how fast we would slide down it. We were told that the curbs on speech of President Trump and his supporters were necessary to prevent further “insurrection” and protect the peaceful transition of power.
However, much like the troops and barricades that still ring the Capitol, these speech restrictions remain in place well after the transition of power has occurred. The censorship power is always justified in response to a genuine outrage or crisis, but it is rarely relinquished once the threat passes. Rather it gets weaponized to protect powerful, connected insiders, as the GameStop fiasco illustrates.
How do we suppose Discord chose that moment to enforce its “Community Guidelines” against WallStreetBets? Almost certainly, one of the hedge funds whose ox was being gored combed through their message boards looking for anything that might violate the terms of service.
How do we suppose Discord chose that moment to enforce its “Community Guidelines” against WallStreetBets? Almost certainly, one of the hedge funds whose ox was being gored combed through their message boards looking for anything that might violate the terms of service.
And surely they found it, as these boards contain the same raunchy language you would hear if you visited any trading floor or boiler room on Wall Street. They presumably reported the content to Discord, which took the group down.
Did Discord warn WallStreetBets of content violations before last Wednesday? I’m sure they did. Amazon sent such a warning letter to Parler as well. Frankly, such a letter could be, and likely is, sent to every large message board on the web. The founder of a user-generated content site described it to me as “the One Percent Problem.”
Did Discord warn WallStreetBets of content violations before last Wednesday? I’m sure they did. Amazon sent such a warning letter to Parler as well. Frankly, such a letter could be, and likely is, sent to every large message board on the web. The founder of a user-generated content site described it to me as “the One Percent Problem.”
Every user-generated content site will have a small percentage of offensive material that gets through, no matter how many content moderators are hired. For example, Facebook, Twitter, and YouTube allowed far more content advocating for and planning the Capitol riot than Parler. But instead of acknowledging this, they were eager to blame the upstart, which had recently taken over the top spot in the social networking category in the app store. Scapegoating Parler served the dual purpose of deflecting blame and squashing a competitor.
Critics of social networks insist that these sites simply need to double down on censorship in order to finally rid us of problematic speech. But that ignores how social media moderation actually works. Algorithms set to recognize keywords capture only a small fraction of problematic posts, leaving millions of posts for humans to review.
Critics of social networks insist that these sites simply need to double down on censorship in order to finally rid us of problematic speech. But that ignores how social media moderation actually works. Algorithms set to recognize keywords capture only a small fraction of problematic posts, leaving millions of posts for humans to review.
The work is so voluminous that it’s outsourced to far-flung locales where English may not even be the first language. Low-level employees must decipher complicated guidelines while navigating our increasingly Byzantine world of political and cultural hot-buttons.
Mistakes are inevitable, and the harder a company tightens the standards to get the One Percent Problem down to 0.1 or 0.01 percent, the more undeserving accounts—from Ron Paul to the Socialist Equality Party—will be swept up in the dragnet. With the Town Square now digitized, centralized, and privatized in the hands of a cartel of Big Tech companies, the protections of the First Amendment no longer apply...
- Source, Zerohedge, read the full article here