When rumours make news

It is unprofessional for a journalist to report rumours without checking their accuracy. Even when unreported by the media, rumours may have dramatic consequences. They can, for example, start riots or cause upheaval in financial markets.

An unexpected, large and sudden rise or fall in share prices is newsworthy. If it was spurred by rumour, that is worth reporting, too.

On May 23 this year, a photo on Facebook showed black smoke billowing from what appeared to be a government building near the Pentagon.

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Stock prices tumbled as the image spread to Twitter, the financial news site ZeroHedge, and to the state-owned television channel Russia Today.

Within minutes, experts had dismissed the picture as a fake. ZeroHedge and RT deleted it and Facebook blocked access to the original post.

The markets promptly recovered. But the event spooked US government officials and regulators, since it seemed to have been caused by artificial intelligence. Bloomberg reported that it was thought to be the first example of an AI-generated image moving the stock market.

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It was a textbook example of the rule that journalists may report rumour — not as fact, but as a cause of a newsworthy event. The DL News stylebook says that.

Life, however, is sometimes messier than textbooks or style guides. What if the rumour turns out to be true, but was deliberately leaked? What if it were maliciously false?

In such cases, a journalist who failed to take precautions might be suspected of pushing someone’s agenda.

Finance reporters probably have more reason than other journalists to be wary of sources who do just that. Some of those covering crypto face particular difficulties.

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DL News’ DeFi Correspondent Osato Avan-Nomayo, who specialises in decentralised autonomous organisations (DAO), says his job ought to be straightforward.

“All stakeholders publish their views on public spaces like the DAO forum, Discord or other social media channels,” he said. In reality, there are a lot of backchannel discussions not open to the public.

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When DAO members disagree, some “try to use journalists as tools to further their agenda,” Osato explained.

Reporters are sometimes given access to gated chat rooms where information can usually be taken at face value, but on condition that they do not quote their sources.

Rumours and anonymous tips can provide important context, Osato said, but “in the end, it is the reporter’s job to consider all of the information available and stick only to the facts that can be attributed to reputable sources.”

DL News’ Markets Correspondent Adam Morgan McCarthy has also had experience in dealing with agenda-pushing sources.

He recalled the discussions between creditors and the crypto lender Genesis, which filed for bankruptcy in January this year.

“In February there were rumours which were tricky because they were coming from people who said they were involved with the creditors’ committee and there was going to be an agreement,” Adam said.

“It seemed like they were trying to put these rumours out there and get the story out ahead of Genesis,” he added.

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Genesis and its parent company Digital Currency Group reached an in-principle agreement with the creditors in February to resolve claims amounting to $3.4 billion.

Reuters reported in July, however, that a restructuring plan had yet to be agreed upon. This month, the agency also reported that the largest creditor, Gemini, founded by former US Olympic rowers Cameron and Tyler Winklevoss — which is owed $1.1 billion — was in talks with other creditors to get more money out of Genesis.

Delving deeper into the topic, in November 2022, the US National Library of Medicine published an analysis of stock market reaction to news of the Covid-19 pandemic.

It focused on the UK stock market between February and December 2020 and found that the effect of media coverage was often greater than the effect of the pandemic itself.

“This is because news coverage may make investors more emotional and lead them to do irrational things,” the report said. “Stock markets overreact to good news but under-react to bad news.”

All the more reason, therefore, to double-check rumours. But that is often difficult when so much of the information in crypto comes from social media and reporters are under pressure to match their competitors in real time.

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“There’s a race to cover things,” Adam said, referring to places where he worked before joining DL News this summer.

“You get a screenshot of a legal document that’s been tweeted, and if someone with 100,000 followers tells you this is what it means you are supposed to accept it,” Adam noted. “You don’t have time to stand back and try to understand it, or you’ll miss the jump and someone will have the story ahead of you.”

In one newsroom, which need not be identified, the pressure to get stories out first was such that “if inflation is slightly above expectations and Bitcoin moves, they will put out three [paragraphs] saying Bitcoin drops on inflation figures,” Adam said.

“The market will continue to whipsaw for half an hour, people will digest it, then a couple of economists will comment, and that will move things again,” Adam noted. “You will often see a story on some sites saying the exact opposite of what they reported 40 minutes earlier.”

At DL News, Adam said, “we do more original reporting; we focus on what matters and with what authority.”

Rumours can start in various ways and may turn out to be true. They should not be confused with fake news, although some rumours may be intentionally false.

Misinformation is an important subject which requires a separate column of its own.

Do you know of rumours that spooked the markets? If so, you can share your experience with me at robert@dlnews.com