The top US securities regulator is probing Melvin Capital Management’s risk controls and investor disclosures after the hedge fund was decimated in last year’s meme-stock frenzy, according to a new report.
The Securities and Exchange Commission is investigating what Melvin founder Gabe Plotkin told investors after the fund lost $6.8 billion by betting against GameStop shares during the frenzy, the Wall Street Journal reported on Thursday.
Melvin had been one of Wall Street’s most successful hedge funds prior to January 2021, when the fund suffered billions in losses in a battle of wills against an army of small investors on the Reddit forum WallStreetBets.
WallStreetBet users considered Melvin their arch-nemesis for taking out massive short positions in their beloved GameStop, a type of trade that would earn the fund a profit if the struggling video game retailer’s share price had fallen.
Instead, small investors drove the stock to dizzying heights and inflicted billions in losses on…