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Texas AG Ken Paxton orders investigation into Robinhood, other trading sites for restricting stock buys during GameStop squeeze

Paxton issued 13 civil investigative demands Friday after traders were restricted from buying GameStop stock as hedge funds bled cash after shorting the company.

DALLAS, Texas — Texas Attorney General Ken Paxton jumped headfirst Friday into the story that's sweeping both America and Wall Street: stocks for a struggling GameStop soar as Redditors squeeze shorts made by wealthy hedge funds. 

Paxton announced that he issued 13 civil investigative demands to multiple trading entities after buyers were restricted this week from purchasing any more, surging GameStop stock. 

The restrictions were a source of outrage over the last 24 hours. 

The popular day trading app "Robinhood" took most of the bad press, mainly because many found their actions juxtaposed with the company name simply ironic. 

GameStop's stock, which is based in Grapevine, was shorted by multiple hedge funds, and when Redditors under the 'r/WallStreetBets' group found out, they began buying shares of the company in bulk. 

The soaring stock forced those hedge funds to lose billions within days.

RELATED: Experts explain what's happening with GameStop stock and what to expect next

The thread of speculation on the internet, and amongst talking financial heads on television, is that influential and wealthy Wall Street members pushed trading companies to restrict purchases so the stock would crater. 

That has yet to be proven, but Paxton wants to find out. 

His statement regarding his newly launched investigation is below: 

"Attorney General Ken Paxton today issued 13 Civil Investigative Demands (CIDs) to Discord, Robinhood Financial, Robinhood Markets, Robinhood Securities, Interactive Brokers, TD Ameritrade, TD Bank, E-Trade, WeBull Financial, Public Holdings, M1 Holdings, Citadel Financial, and Apex Clearing Corporation, regarding the prohibition of certain stock purchases, requiring higher margin reserves for trading certain companies, and suspending chat platform activity. In addition to public statements and internal documents, the CIDs request copies of all terms of service, policies related to content control and moderation, and communications between platforms and moderators of chat servers, including decisions to limit, control, or prevent access to the Discord r/WallStreetBets server." 

In the meantime, the U.S. Securities and Exchange Commission pledged Friday that it would punish abusive trading activity. 

It signals that regulators will be looking into the mania caused by GameStop to see if any criminal misconduct is afoot. 

In a statement, the SEC said it would also look into some brokerage firms' actions that placed restrictions on GameStop. 

In part, commissioners said the following: 

"The Commission will closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.

"In addition, we will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws. Market participants should be careful to avoid such activity. Likewise, issuers must ensure compliance with the federal securities laws for any contemplated offers or sales of their own securities."

Ken Paxton was indicted on felony securities fraud charges five years ago and has not faced a trial as of yet. 

He is accused of persuading investors to buy stock in a technology firm without disclosing that he would be compensated for it per the Texas Tribune. 

He has maintained his innocence and has criticized the prosecution as politically motivated.

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