(Reuters) – The U.S. securities regulator is looking into Melvin Capital Management’s risk controls and investor disclosures after the hedge fund was hammered by the meme-stock rally last year, the Wall Street Journal reported on Thursday.
The Securities and Exchange Commission (SEC) contacted the hedge fund’s investors in recent months and is probing whether the company misled them when it raised money last year, the report said, citing people familiar with the matter.
The SEC is also seeking information on what the firm, founded by Gabe Plotkin, disclosed about the risks of its investment strategy to clients, according to the report.
An SEC spokesperson declined to comment to a request from Reuters.
Melvin Capital said in May it would shut down after taking a beating during this year’s market slump. The hedge fund also posted heavy losses in 2021, partly because of its bets against meme-stock GameStop Corp.
(Reporting by Niket Nishant in Bengaluru and Katanga Johnson in Washington; Editing by Aditya Soni)