<p><img src="https://static4.businessinsider.com/image/601943006dfbe10018e013b3-2400/2016-05-05T000000Z_14415219_S1BETCFBZNAA_RTRMADP_3_FUNDS-SOHN.JPG" border="0" alt="2016 05 05T000000Z_14415219_S1BETCFBZNAA_RTRMADP_3_FUNDS SOHN.JPG" data-mce-source="Brendan McDermid/Reuters" data-mce-caption="Short-seller Carson Block is the founder of Muddy Waters Research"></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p>Activist short-seller Carson Block has suggested hedge funds may have coordinated to squeeze other hedge funds by driving GameStop shares higher last week.</p><p>Block, founder of Muddy Waters Research, also said he thinks "financial markets are broken" thanks to too much credit swilling around, in an <a href="https://www.bloomberg.com/news/articles/2021-02-01/carson-block-suspects-hedge-fund-coordination-in-short-squeezes">interview with Bloomberg TV</a> on Monday.</p><p>Last week, <a href="https://www.businessinsider.com/reddit-day-traders-wallstreetbets-gamestop-gme-rally-upending-stock-market-2021-1">day traders organizing themselves</a> on the social media website Reddit united to drive up the shares of video-game store <a href="https://markets.businessinsider.com/stocks/gme-stock">GameStop</a> by around 400%.</p><p><strong data-stringify-type="bold"><em data-stringify-type="italic">Read More: </em></strong><em data-stringify-type="italic"><a href="https://www.businessinsider.com/stock-picks-to-buy-24-highest-conviction-buy-rated-stocks-2021-1" target="_blank" rel="noopener noreferrer" data-stringify-link="https://www.businessinsider.com/stock-picks-to-buy-24-highest-conviction-buy-rated-stocks-2021-1" data-sk="tooltip_parent" aria-describedby="sk-tooltip-5392">Jefferies says to buy these 24 stocks that represent its analysts' highest-conviction picks for 2021</a></em></p><p>The soaring share price squeezed hedge funds who had been "shorting" the stock - that is, betting the share price would fall. An estimate by data company Ortex on Friday put short-sellers' losses on GameStop at around <a href="https://www.businessinsider.com/short-sellers-sitting-on-19-billion-of-losses-on-gamestop-data-shows-2021-1">$19 billion</a> for the year, with <a href="https://markets.businessinsider.com/news/stocks/melvin-capital-lost-53-percent-january-after-gamestop-shares-skyrocketed-2021-1-1030023191">Melvin Capital losing around 53%</a> in January.</p><p>Yet Block questioned in a Bloomberg interview on Monday whether it was only amateur investors who had driven up the shares of GameStop and other shorted names such as cinema chain <a href="https://markets.businessinsider.com/stocks/amc-stock">AMC</a>.</p><p>He said he believes his own short position on Chinese education technology company GSX Techedu was squeezed by a "consortium of hedge funds" last year.</p><p>"Some very smart sophisticated hedge funds have been playing the squeeze game for a while," he said. He added that he thought the GameStop saga was in a way "the democratization of this tactic."</p><p>Block said he wondered if there was "coordination" between some hedge funds over GameStop. "What constitutes coordination' Did they cross the line' That could be interesting," he said.</p><p><strong data-stringify-type="bold"><em data-stringify-type="italic">Read More: </em></strong><em data-stringify-type="italic"><a href="https://www.businessinsider.com/stocks-to-buy-silver-short-squeeze-stock-picks-rbc-2021-2" target="_blank" rel="noopener noreferrer" data-stringify-link="https://www.businessinsider.com/stocks-to-buy-silver-short-squeeze-stock-picks-rbc-2021-2" data-sk="tooltip_parent" aria-describedby="sk-tooltip-5394">Buy these 4 stocks poised benefit from a spike in silver prices, says RBC Capital Marketsincluding 2 set to soar 73%</a></em></p><p>The Muddy Waters CEO criticised the Federal Reserve for pumping record amounts of stimulus into the economy and holding down rates over the last few years, which he said was fueling asset bubbles.</p><p>"Financial markets are broken," he said. "Really what's been going on is we're in this cycle of blowing bubbles that suck in the middle class, and when the bubbles burst, wealth is not destroyed, it's just transferredfrom the many to the few."</p><p>Block said he thought interest rates should not rise during the pandemic, but suggested policymakers need at some point "to rein in this economic policy that's dependent solely on inflating asset prices."</p><p><a href="https://markets.businessinsider.com/news/stocks/carson-block-asks-if-hedge-funds-participated-in-gamestop-squeeze-2021-2-1030032271#comments">Join the conversation about this story »</a></p> <p>NOW WATCH: <a href="https://www.businessinsider.com/how-symphony-seas-worlds-largest-cruise-ship-deals-with-waste-2020-3">How waste is dealt with on the world's largest cruise ship</a></p>
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