Can you trust the people giving you advice on social media? That’s a question everyone should take the time to ask themselves.

The rise of influencer marketing has created a convenient avenue for companies to push questionable or even dangerous products into the American mainstream. Platforms such as Instagram and TikTok have enabled average people to reach influencer status and companies have seized the opportunity to expose new markets to their offerings — even if they aren’t safe or advisable. For example, social media influencers have promoted tobacco products to non-smokers and dangerous tanning products to young people with very little regulation. Now, this dangerous trend has infected financial markets as well. 

This is evident in the recent resurgence of Keith Gill (aka Roaring Kitty), the social media influencer credited with launching the GameStop (NYSE:GME) short squeeze. Gill retreated from the public eye after the 2021 GME stock short squeeze momentum died down, by which point, Business Insider reports, his position in the video game retailer had reached a value of $30 million. For years after that, he remained quiet on YouTube and Reddit, platforms on which he had amassed a significant following. 

But on May 12, 2024, with no warning, Gill resurfaced on X (formerly Twitter) by sharing an image of a man playing video games. Gill offered no context, but he didn’t need to. Meme stocks such as GameStop and AMC Entertainment (NYSE:AMC) surged almost instantly. 

However, meme stock rallies often fizzle out quickly, and this time proved to be no exception. Gill’s initial post proved effective at sending GME stock up more than 170% while AMC and fellow meme stock Koss (NASDAQ:KOSS) enjoyed similar momentum. But less than a week later, the momentum subsided and shares fell significantly (although they remained elevated year-to-date).

As shares battled high volatility, regulators began to eye Gill’s trading activity as suspicious. CoinGape reports that U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler has expressed specifically that Gill’s trades could potentially be considered market manipulation. 

After the dust settled from the Roaring Kitty rally of May 2024, two things were abundantly clear: 1) Gill is one of the investing world’s most powerful influencers and 2) if his followers aren’t careful, his influence could cost them a lot of money.

The Rise of Dangerous Influencer Marketing 

Keith Gill isn’t the first person that comes to mind when you hear the term “social media influencer” and the combo of social media and the stock market is certainly a newer phenomena. But this is an evolving world. As social media platforms have exploded in popularity throughout the past decade, so has influencer marketing. People have found ways to build significant followings — even if sometimes that means posting content that goes viral unexpectedly, just as Gill did when he first began vlogging about his initial GME investment. Companies have replaced their television infomercials — long a staple of advertising — with social media partners who can reach millions with one post. 

Integral to the impact of influencers is that they are not traditional celebrities. According to recent studies, “92 percent of consumers prefer recommendations from people they know over traditional advertisements.” Another 2024 study revealed that more than 60% of consumers trust influencer recommendations enough to let them impact their purchasing decisions. 

However, the many people making purchases based on influencer content might be better served to look into what they are buying. In 2021, tobacco giant British American Tobacco (NYSE:BTI) began partnering with social media influencers to promote Velo, a nicotine product known for its addictive tendencies. In 2022, BBC News also found that many U.K. influencers had been promoting tanning products that their country had banned due to links to cancer. Other influencers have been accused by the Federal Trade Commission of promoting the safety of artificial sweeteners such as aspartame without proper disclosures. 

The trend of everyday people gaining profound influence over such large audiences likely helped pave the way for Gill. His down-to-earth persona and playful cat t-shirts were a stark contrast to the shiny suits and vests that have become the uniforms of Wall Street. And this image likely helped him resonate with people who saw Wall Street as the enemy, especially as Gill’s investing mentality offered a way to strike back at the institutions of high finance. 

How deeply did he resonate with investors? The subreddit forum r/WallStreetBets, where Gill first gained notoriety in 2020, had reached 10 million registered subscribers by May 2021, by which point the squeeze had mostly concluded. According to recent statistics, that number is now closer to 15 million. 

The Damage Done

Gill likely didn’t start out with the goal of inspiring an entire generation of traders. He claims he first purchased GME call options in June 2019 and increased his position through 2020 because he saw GME stock as being undervalued. As he documented his journey through Reddit and YouTube, many amateur traders started buying shares and options themselves in what they saw as a quest to harm the Wall Street short sellers who were betting against the stock. 

Intentionally or not, Roaring Kitty was peddling a dangerous product, however: Meme stocks. Amateur traders were watching a seemingly regular person make what looked like easy money while harming the financial institutions betting against it. It’s easy to become enamored with a David and Goliath story, especially when it offers you a way to make some money yourself. The GME short squeeze was no exception.

In May 2024, Roaring Kitty’s return to social media ignited another meme stock rally. The day after Gill’s return post began trending, GME stock skyrocketed 110% in just a few hours while AMC rose 78%. Given how poorly both companies had performed during the year’s first quarter, no one could ignore the fact that it had surged entirely on momentum generated by the single, cryptic X post. 

Regardless of whether or not he meant to create such a movement, Gill is tied to the damage done in his wake. Most recently, that looks like the $13.1 billion in losses reported by investors after GME stock came crashing down once the May rally had subsided. To illustrate further, that figure is “nearly double GameStop’s entire market capitalization.”

This illustrates the easy money myth of meme stock investing. Easy money is only easy if you take the profits you’ve made and walk away while you can. Many of those investors’ refusal to cash out when they had the opportunity to take profits proved extremely costly. The legions who were following Gill saw their GameStop investments as a means of leveling the playing field against Wall Street. “If he’s still in, I’m not leaving,” they cheered in 2021. 

This is not unlike what happened three years ago. Many Reddit threads feature stories from GameStop investors who took significant losses when they opted against selling. While this may not have been Gill’s fault directly, he was well aware that these people were following his example. He rose to fame by documenting his bullish thesis on GME stock. But when he didn’t highlight a clear exit strategy, some investors were left behind in the fantasy of harming Wall Street’s short sellers.

As GME stock tumbled after the 2021 short squeeze, The Washington Post reported that many traders lost thousands of dollars in as little as one trading day. The outlet recounted the woes of one college-aged r/WallStreetBets user:

“Had he sold last week, he could have pocketed a typical American’s annual salary. But as the stock has crumbled, he has turned to the forum for reassurance, posting a screenshot from his online-banking app showing the day’s losses, totaling about $9,000.”

The impact of the GameStop squeeze didn’t end there. One anonymous trader recounted that they lost almost $400,000 on an ill-fated trade buying Alibaba (NYSE:BABA) call options. “The big tipping point was GameStop. It was just ridiculous, and I got greedy and had FOMO,” the individual wrote.

In this, we see exactly why Gill should be considered akin to an influencer marketer. He enjoyed extremely healthy profits after cashing out of his original GameStop bet. In 2021, he shared a screenshot of his GameStop holdings, revealing “$19 million in equity and $8.9 million in options” as well as $11.9 million in cash.

But, as noted, many of his followers took steep losses. Like the influencers who pushed harmful smoking or tanning products, Gill benefitted from limited oversight on his chosen platforms. He also catered to a vast audience with limited knowledge of the relevant industry — which was, in this case, investing. As I recently reported, many retail investors have admitted to making bets on meme stocks without truly understanding the company’s fundamentals or growth prospects. Actual financial experts have made it clear that that strategy is highly risky and inadvisable.

Even if he didn’t start out with the goal of igniting a movement among retail investors, the impact of Gill’s actions cannot be overstated. He had been working in the financial industry for years, holding a role at MassMutual that centered around financial education. He even once held the designation of financial broker, although he no longer held this license as of March 2021.

As someone with an actual understanding of financial analysis market metrics, he made a fortune betting on GameStop. At one point, his position in the stock reached a value of $48 million. In June 2024, the rally that bore his name almost took him to billionaire status. But after achieving undeniable success, Gill stepped away and went silent as his admiring retail investors continued to make poor trading decisions — often quoting his now iconic phrase, “I like the stock,” to justify their reckless meme stock trades. This mantra remains a battle cry among retail investors to this day. 

What Comes Next?

Gill started his journey as a modern day folk hero, helping a group of regular people mount a rebellion against a much larger foe. But when we step back and take an in-depth look at his entire trajectory, it’s clear that like other market influencers, Gill has proven his type of power cannot go unchecked. Regulatory action is necessary to ensure that retail investors are more protected from misinformation — either predatory or unintentional — that continues to trend on social media

This could come in the form of more regulatory crackdowns regarding who can post financial content to social media. If someone’s number of followers reflects a high degree of influence over others, for example, they should face more scrutiny. 

Additionally, social media platforms have a responsibility to police the investing content that is posted to them. Reddit (NYSE:RDDT) CEO Steve Huffman credits his own user base with ensuring that the investing advice on the platform is valuable, saying it “has to be accepted by many thousands of people before getting [high levels of] visibility.” But that doesn’t mean the advice is good. That’s where the need for further oversight from these platforms comes in.

When I spoke to personal finance and legal expert Erika Kullberg about spotting a credible financial market influencer, she highlighted the importance of avoiding making investments simply based on social media hearsay and groupthink mentality — exactly the trends that have led to ill-fated meme stock plays. Gill’s resurgence has shown that it’s time for regulators to focus more on weeding out the dangerous content that continues to trend across social media. 

As I’ve written before, it’s unquestionably important for investors to conduct proper research and analysis before betting on a stock. That often means listening to experts. But identifying credible financial advice and smart insights can be difficult in today’s unending flood of digital information. Scrutinizing influencers — and curbing the influence of snake oil salesmen — is necessary to protect investors from questionable-at-best advice. 

On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.