A sophisticated online manipulation attack on social media platform Reddit caused an exacerbated drop in Credit Suisse’s share price before its eventual collapse, according to new research from UK tech startup Valent Projects. The findings suggest healthy banks may also be at risk.
Reddit was the focal point of the GameStop saga in 2021, when retail investors coordinating on the site executed a short squeeze on the US retailer, causing several hedge funds significant losses.
Trading subreddits that featured in both the GameStop squeeze and our Credit Suisse investigation wield influence over funds up to $14 billion, and investors there account for an ever growing proportion of market flows. Social media-powered manipulation is going to inevitably become a bigger threat to the financial stability of the banking sector.
Analysis using Ariadne, Valent Projects’ AI tool that detects fake accounts and tracks narratives, revealed the use of posts to test narratives about Credit Suisse, identifying which provoked the most hostility. It is unclear at this point whether the activity was organised by an institution or mobilised individuals, although this could likely be established using open source intelligence methods.
Amidst legitimate news that the bank had made a loss of 4 billion Swiss francs (£3.6 billion), both real accounts and bots published damaging posts on the platform. Short sellers then bet against the bank, earning millions, if not billions, as the online attacks pushed the bank’s stock towards all-time lows.
Credit Suisse’s stock dropped by 20%. The bank never recovered, and was merged with rival UBS in March 2023.
Amil Khan, Valent Projects’ CEO, said: “Techniques born in conflict zones are now being deployed in the financial world. Methodologies are constantly evolving and AI will make narrative tracking and content distribution a lot easier. Soon, every bank will be a target.”
Editorial by Amil Khan (firstname.lastname@example.org)
Data Analysis by Fergus McKenzie-Wilson (email@example.com)