How 2 Guys Allegedly Manipulated the GameStop Options Market

Two men allegedly completed thousands of “wash trades” with themselves to harvest hundreds of thousands of dollars in meme stock rebates from broker apps.
How Two Guys Allegedly Manipulated the GameStop Options Market
Bloomberg / Contributor

On Monday, the SEC charged two people—Suyun Gu and his friend Yong Lee—for a scheme that saw the pair manipulate the options market for so-called meme stocks, netting them hundreds of thousands of dollars in ill-gotten gains. 

The criminal complaint shows continued SEC scrutiny of the meme stock bonanza from earlier this year. The SEC and other regulators continue to investigate Robinhood to see if it holds any liability for halting trading on GameStop and other meme stocks, resulting in further volatility in an already volatile market. Thus far, however, the only real enforcement has come against individual people, such as Gu and Lee.


Gu and Lee allegedly engaged in “wash trading,” which is when one entity trades with itself, playing the role of both buyer and seller, unbeknownst to other market participants. Essentially, the pair allegedly traded put options for GameStop, AMC, and a handful of other meme stocks back and forth with themselves and with each other across a series of different apps, pocketing rebates from market makers and ultimately manipulating the options markets for meme stocks early this year, when trading was at its highest point. 

According to the complaint, Gu and Lee made trades involving hundreds of shares of stock, and were responsible for between 60 and 89 percent of all put options trading of AMC, GameStop, BlackBerry, and Nokia stock on a single day in March. This trading impacted the options market as a whole, according to the complaint. 

“In addition to substantially contributing to the volume of trading, Gu and Lee’s trading prompted other traders to trade the options that they targeted … in other words, Gu’s and Lee’s wash trading in this contract induced other traders to place trades in an otherwise illiquid option contract,” the complaint reads.

Maker-take programs simply structure orders so that a trade is sent to an exchange and executed against a later order to make liquidity and generate value. A small rebate is issued to those who provide liquidity (makers) and a fee for those traders who “take” it. Here, the SEC accuses Gu and Lee of inserting themselves to play both sides and generate illegal profits from the value generated by an exchange.

“The SEC's complaint alleges that Gu was able to generate illicit profits by using broker-dealer accounts that passed rebates back to their customers to place initial orders on one side of the market, and then using broker-dealer accounts that did not charge fees for taking liquidity for his subsequent orders on the other side of the market.” the SEC’s release reads. “When identifying a product to trade, Gu and his friend and business associate, Yong Lee, selected far out-of-the-money put options on some ‘meme stocks,’ which they thought would be easier to trade against themselves because interest in buying the "meme stocks" and related price increases would make put options on those stocks less attractive.”

The alleged scheme continued even after Gu's and Lee's accounts were closed by some platforms in March 2021 as Gu lied to broker-dealers: He not only created accounts using other people's names but also accessed them through VPNs  to obscure his identity. Gu was able to execute 11,400 trades himself and gain $668,671 in liquidity-rebates after commissions and fees ($1,370,000 total) while Lee executed 2,300 trades with himself and saw $51,334 in liquidity rebates.