US government officials are investigating whether “market manipulation” may have been behind the recent volatility in US banking stock prices, according to a new Reuters report on the matter.

Following the collapse of regional bank First Republic Bank, shares of other regional banks began a precipitous decline this week. On Thursday alone, short sellers made $378.9 million in paper profits betting against specific regional banks, according to data from analytics firm Ortex. For its part, the White House vowed to more closely monitor “short-selling pressures on healthy banks.”

Given the strong fundamentals in the sector and sufficient capital levels, federal and state regulators have been applying increased scrutiny to the increased short selling and volatility in shares, according to an anonymous source, who was not cleared to speak publicly about the matter.

According to the source, “State and federal regulators and officials are increasingly attentive to the possibility of market manipulation regarding banking equities.”

Although White House press secretary Karine Jean-Pierre said the White House was watching developments closely, she pointed out all actions in the matter will come from the Securities and Exchange Commission.

Jean-Pierre said, “The administration is going to closely monitor the market developments, including the short-selling pressures on healthy banks.”

The SEC also received a formal request from the American Bankers Association Thursday, requesting it investigate significant short sales of banking shares as well as social media activity which it noted was, “disconnected from the underlying financial realities.”

The group wrote, “We urge the SEC to consider all its existing tools and to take measures to reduce the avenues for abusive trading practices and restore investor confidence.”

SEC Chair Gary Gensler said Thursday that the agency will pursue all misconduct which threatens the market or investors, noting, “As I’ve said, in times of increased volatility and uncertainty, the SEC is particularly focused on identifying and prosecuting any form of misconduct that might threaten investors, capital formation, or the markets more broadly.”

Lindsey Johnson, Consumer Bankers Association President and CEO, emphasized that the banking industry remained strong, as he demanded policy makers call out “unethical behavior by activist investors,” exploiting market volatility.

In his statement, Johnson said, “This volatility is being fueled by emotion and misinformation that does not reflect the strong underlying fundamentals of our banks. These institutions remain resilient and well-capitalized, and Americans can rest assured their deposits are safe.”

On Thursday, the S&P 600 bank index (.SPSMCBKS) fell over 3%, as PacWest Bankcorp plummeted 50% before trading in it was halted, after the bank revealed it was exploring strategic options. Western Alliance Bancorp (WAL.N) dropped over 38%, with trading halted multiple times, before it denied a report from the Financial Times claiming it was exploring a potential sale, noting it was merely exploring legal options.

Reuter’s source noted that the share price volatility was inconsistent with the fact that many regional banks had outperformed expectations for first quarter earnings while maintaining sound fundamentals, with stable deposits, sufficient capital reserves, and lower levels of uninsured deposits.

The California Department of Financial Protection and Innovation refused to confirm if it had any investigations underway, nor would it confirm if it was aware of any specific marketplace activity. It would only state that it was focused on “identifying, stopping, and remedying any unlawful practices in our markets” which violated state law.

Although short selling – the practice of selling borrowed securities which are bought back to return later at a lower price is legal, the manipulation of stock prices, defined by the SEC as the “intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting” stock prices is not.

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