In an example of stock market manipulation in the era of social media, two companies’ stock prices were sent on a whirlwind ride by “Wall Street Bets,” a subreddit belonging to the social media site Reddit. The subreddit, which analyzes the stock market with a satirical and comical approach, got together to buy the stocks of movie theater company AMC and video game seller GameStop.
These two companies were on a downward spiral. Their stock buying gained momentum, and for a while, the prices for both companies went through the roof before crashing back to reality. Though this event did not come close to what Kosuga did back in the 1950s, it is an interesting example of how manipulating markets has evolved with the times.
A Pair of Brothers Tried to Imitate Kosuga in the 1970s
The Hunt brothers, Nelson and William, tried to corner the silver market — not of a city or state but of the whole world. Both worked on an elaborate scheme to control a huge amount of the globe’s available silver and did, in fact, at some point hold the rights to over half of the world’s deliverable silver.
Their actions contributed to a large change in silver prices: the beginning of 1980 saw an ounce being worth nearly 50 dollars, up from around 11 dollars from September of the prior year. When prices finally did go down in March, they went down hard, falling well below 11 dollars an ounce in what came to be known as “Silver Thursday.” All in all, the Hunt brothers lost over a billion dollars in the ordeal.
A Kosuga-Style Scheme in Japan
Yasuo Hamanaka, a trader who used to work for Sumitomo Corporation, gained notoriety after attempting to corner the world copper market in a scheme that spread out over nearly ten years. His plans didn’t work out, and by 1996 he was left with very large copper positions that were worth much less than he had planned.
The losses incurred by Hamanaka added up to more than 2.5 billion dollars, which as of now ranks #14 in the list of top trading losses ever. Hamanaka spent a lot of time and energy to hide the losses that eventually came to light, which included keeping a secret records book, forging data and signatures, and lying to his bosses. In 1997, he was sentenced to eight years in prison in Tokyo.
Onion Farming Is Still a Tough Business
Because growing onions depends a lot on the whims of the weather and other factors that are hard to control, being in the onion business was never a particularly easy task before, during, or after Kosuga’s time. After Kosuga and Siegel were taken out of the market for a time, the price of onions was still volatile, often rising and falling unexpectedly.
Ironically, banning onion futures also limited the financial options of farmers: before, futures were another tool in the toolbox by which farmers could sell their produce ahead of time — instead of having to pay the costs of storing them, for instance. After Kosuga and the legislation that his actions inspired, this was no longer possible.
The Onion Futures Act Was Amended in 2010
Strangely enough, the Onions Futures Act was amended 52 years after its passing to include, of all things, movie box office futures. The amendment came after lobbying from the Motion Picture Association of America, which did not approve of the increasingly common practice of folks speculating about the box office success or failure of movies.
Such activities lent themselves to be subject to insider trading, which is why the amendment included a provision that stated that box office receipts could only be valid for two days after being emitted. Echoing the language used back when the Onion Futures Act was passed, the Motion Picture Association argued that allowing box office futures to flourish would allow “unbridled gambling” and would negatively affect the integrity of the film industry.