The U.S. Justice Department is ramping up its focus on short-selling, the practice of seeking to profit off bets that a stock will fall. Avi Perry, the chief of the department’s market integrity team, said at a Practising Law Institute event in New York that there will be more activity from the DOJ involving short sellers in the coming months.
The agency has been investigating potential manipulation by short sellers and hedge funds around the publication of negative research reports since 2021. It is also looking into short-selling activity in bank shares, which have been volatile since three bank failures in March.
Perry said that cases against executives who misuse corporate trading plans and spoofing – a type of futures market manipulation technique – remain priority areas. The DOJ is using data to root out potential misconduct by traders and to dig more deeply into securities markets.
Overall, the Justice Department is taking a closer look at short-selling and the potential for market manipulation. It remains to be seen what action the agency will take in the coming months.