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Melvin Capital, the hedge fund that was wrongfooted by retail traders who drove up shares in GameStop and other companies it had bet against, lost 53 per cent in January, according to people familiar with the firm’s results.

The New York-based hedge fund sustained a $4.5bn fall in its assets from the end of last year to $8bn, even after a $2.75bn cash injection from Steve Cohen’s Point72 Asset Management and Ken Griffin’s Citadel.

Melvin became the target of retail traders who co-ordinated to drive up the share price of GameStop on online message boards such as Reddit, after the firm disclosed its bet against the company in regulatory filings.

The Securities and Exchange Commission announced on Friday it was looking into what happened when Redditors drove shares dramatically higher, but lawyers doubt it will lead to prosecutions. In order to prosecute traders, regulators would need to find evidence of deception to prove market manipulation, say lawyers.

The SEC is not only looking into the traders who bought stock last week however: it is also probing the brokerages that enabled the trades, before placing temporary curbs on them, triggering sudden share price drops. (FT, Bloomberg)

Further reading

Meet the Reddit traders of the WallStreetBets forum at the eye of a market hurricane.

Renowned short-seller Jim Chanos says the GameStop saga has been the most “surreal” episode in his career and is worried about populist politicians looking to capitalise on the situation.

It is important to remember that short sellers play an important role in the financial ecosystem, writes Michael Mackenzie.

FT editorial board: Amid the US market frenzy, there is a palpable sense of anger among many traders, who feel that older generations have cheated them of wealth by mismanaging the economy since the financial crisis. (FT)

Coronavirus digest

Malaysia has reported more than 5,000 new cases for the third day in a row, health ministry data show. Keep up with the latest on our live blog.

In the news

Kremlin orders police to crack down on anti-Putin protests Tens of thousands of people in dozens of cities across Russia defied a heavy police presence to protest on Sunday in support of jailed opposition activist Alexei Navalny for the second straight week. At least 4,710 protesters were detained in dozens of cities. The protests have breathed new life into anti-Putin sentiment. (FT)

Biden shows his hawkish side on China The new US president received unexpected praise from leading China hawk Robert O’Brien. Donald Trump’s final national security adviser said the Biden administration is “off to a great start on China” days after Chinese military aircraft simulated missile attacks on a US aircraft. (FT)

• The Biden administration will put the trade deal struck with China by Donald Trump “under review” as the broader US relationship with Beijing is assessed, the White House said on Friday. (FT)

India plans to create official digital currency Indian parliament is planning to introduce a law that would create a “framework for creation of the official digital currency to be issued by the Reserve Bank of India” and would ban private cryptocurrencies such as bitcoin. (Reuters)

Companies consider writing Hong Kong out of legal contracts Large international corporations doing deals in Asia are considering excluding Hong Kong from legal contracts over concerns that China’s tightening grip may impact rule of law in the territory, according to interviews with corporate advisers across the region.

China executes former finance boss for corruption China has executed Lai Xiaomin, former head of one of its biggest asset management companies, who was convicted of corruption, a punishment that has drawn sharp criticism from international human rights experts. (FT)

China rejects UK passports for Hong Kong residents China has vowed not to recognise a passport the UK offers to Hong Kong residents as valid identification and accused London of violating its sovereignty, after Britain offered up to 3m of the city’s population a new path to citizenship.

What has changed one month after Brexit? The Financial Times looks at five different areas of Brexit-related disruption. While some are teething problems, others risk becoming long-term issues unless changes are made. (FT)

The day ahead

India reveals budget Finance minister Nirmala Sitharaman will unveil the annual budget on Monday, when fiscal policy is expected to play a lead role in generating growth as the central bank seeks a return to a more normalised monetary policy.

UK trade talks Liz Truss, UK trade secretary, is due to speak with ministers in Japan and New Zealand on Monday to request to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, with formal negotiations set to start this year. (FT)

What else we’re reading

What’s stopping India’s recovery India’s economy is experiencing the worst contraction in decades. But even if the threat of the virus fades, India’s medium-term growth prospects will be hindered by high tariffs and loose bankruptcy rules, writes Urjit Patel, former governor of Reserve Bank of India. (FT)

Lunch with the FT: Bellingcat’s Eliot Higgins The internet investigator and his collaborator have proved that Syria’s regime used chemical weapons against its citizens. They unmasked the Russian “kill teams” who poisoned defector Sergei Skripal and opposition leader Alexei Navalny. Peering into the dark corners of the internet has allowed Higgins to find himself. (FT)

Wall Street’s new mantra: green is good To most people outside Wall Street, climate change is an existential or moral issue, not a financial one. But tackling climate change offers a chance to fuel future profits. Is it a turning point? Meanwhile, too many boardrooms are still climate incompetent, writes Pilita Clark. (FT)

Joe Biden’s ‘Buy American’ isn’t bad, it’s necessary The US president’s plan is more than just Trump’s Make America Great Again slogan with a kinder face, writes Rana Foroohar. It’s part of an essential effort to convince Americans that the Biden administration will serve more than the 10 per cent of households who own more than 80 per cent of the stock market. (FT)

The world’s nuclear upsurge Nine countries possess nuclear arms, while another 31 have flirted with the weapons at one time or another. But the battle to stop the world’s deadliest weapon from proliferating is getting harder. (Economist)

Cabling Africa: the great data race Africa’s internet capacity is exploding — becoming faster, denser and more local, which has profound implications for the continent’s economies. Google and Facebook in particular have been going to extreme lengths to bring connectivity to the “last billion” worldwide who have yet to be properly connected to the internet. (FT)

Video of the day

Building a more sustainable food system with AI A host of new innovations using artificial intelligence are boosting our potential to create a healthier, more sustainable food system. (FT)