Billions: Real-Life Applications of Scenarios Depicted on the Show – Market Manipulation

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This week we continue to examine the legal regulatory issues depicted in SHOWTIME’s series Billions, which is based on hedge-fund titan Bobby “Axe” Axelrod and his dynamic interactions with U.S. Attorney Chuck Rhoades. This week’s blog covers market manipulation from Episode 4, “Short Squeeze.”

Spoilers ahead

Market Manipulation

In Episode 2, Axe ordered one of his employees to short the Cross Co. Trucking stock. Chuck Rhoades Sr. finds out about the short, and still holding a grudge against Axe for ousting his mistress from the YumTime board, decides to pump up the stock price by buying more of the stock. Axe learns about Rhoades Sr.’s aggressive move and decides to shore up his position by borrowing shares from a business nemesis. Meanwhile he also has his flacky, Hall, tip off the SEC about the Cross Co. squeeze. They discreetly let Rhoades Jr. know; he then confronts his father, Rhoades Sr., and threatens that he cannot sell his shares even though he is going to lose a lot of money or he’ll risk prosecution.

According to the SEC:

Manipulation is intentional conduct designed to deceive investors by controlling or artificially affecting the market for a security. Manipulation can involve a number of techniques to affect the supply of, or demand for, a stock. They include: spreading false or misleading information about a company; improperly limiting the number of publicly-available shares; or rigging quotes, prices or trades to create a false or deceptive picture of the demand for a security. Those who engage in manipulation are subject to various civil and criminal sanctions.

The SEC continuously looks for circumstances where market manipulation is occurring. Recent enforcement cases involving such fraudulent activities include:

Financial industry firms have an obligation to establish internal controls to identify potential market manipulation schemes and to prevent them from occurring in the first place.

Jacko Law Group, PC is here to help. If you have any questions about what to do if you suspect market manipulation or general questions related to regulatory compliance matters contact us at info@jackolg.com or 619.298.2880.

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Filed under Investment Advisers, SEC

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