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Stock Memes Highlight Threats to Financial Systems

Roaring Kitty awoke after a three-year slumber.

Roaring Kitty, you will remember, is the online persona of Keith Gill, who initiated a type of stock market protest in 2021 that sent the stock of GameStop and a few other companies soaring, causing hedge funds that had shorted the stock—essentially making a bet that the stock would lose value—to lose billions of dollars.

As of press time, there is no definitive confirmation that Gill is still running the accounts, but on Monday the X account for Roaring Kitty posted an image, and the stock price for GameStop spiked, ending the day 75 percent higher than it opened. Other stocks that had made sizable gains in 2021 also gained Monday.

Whatever shenanigans the 2024 reawakening of the feline-themed account has in store for short-term stock valuations, the 2021 episode set off a slew of studies to examine the potential vulnerabilities of stock market manipulation. One of those is a report from Rand that was published in February that studied threats to U.S. financial markets. The Rand study termed a Roaring Kitty-style threat as “memetic engineering,” a type of social engineering using social memes to “manipulate beliefs and behaviors.” It was one of four threat scenarios the report covered, along with using artificial intelligence (AI) to manipulate or exploit algorithmic trading accounts, bond dumping, and deepfake misinformation campaigns.

The general conclusion from the report was that these threats posed only limited risk to U.S. financial institutions because of the high cost of such attacks coupled with the possibility that existing safeguards could blunt damage from the attacks. However, the report had a huge caveat: the risks grow as geopolitical tensions rise and technological capabilities advance, which could flip the cost-benefit equation to bad actors.

From the report:

“Although concerns about a potential 'financial 9/11'—a sudden, catastrophic event with severe consequences—are understandable, our analysis suggests that it is relatively unlikely. Instead, the nature of emerging threats to the U.S. financial system might more closely resemble that of a 'financial climate change.' This implies a series of gradual, interconnected, and evolving risks rather than an isolated, high-impact incident.

“For example, coordinated deepfake campaigns attacking different companies that play out over several years could erode trust in corporate leaders and financial institutions more broadly. Enabled by AI and ML, advanced memetic engineering attacks could progressively undermine trust in financial markets and institutions, causing a steady, incremental impact on market stability rather than a sudden breakdown. Low-profile data poisoning of financial AI models during the training stage could slowly produce suboptimal economic predictions, which avoids triggering market circuit breakers. Geopolitical tensions can create situational triggers that, over time, increase uncertainty and vulnerabilities in the financial system, which leads to a cumulative effect on market performance and overall economic health. While these are speculative risks, their more-gradual nature could also make them more difficult to manage. They may not cause a sudden breakdown, but they could cause a slow decline.”

The report had several recommendations. First, while AI can be used to exploit weaknesses, such as creating deepfakes or cracking and exploiting algorithms to manipulate trading, AI could also be used to combat these applications—to spot deepfakes or to identify when an algorithm is being exploited and counteract it.

Another recommendation was to conduct “economic wargames” to simulate attacks on financial institution and model vulnerabilities and crafting countermeasures to mitigate risks. This would also likely help the sector understand how these threats could evolve over time.

Finally, the study addressed the need for society to address what other researchers had termed “truth decay.” The gradual erosion of facts indicative of truth decay threatens societal institutions en masse; for the institutions—including financial institutions—to survive, society must develop policies and methods to build resilience against attacks on knowledge, critical study, and factuality.