Robinhood CEO to Testify Before Congress Over GameStop Debacle

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In Brief
  • Robinhood CEO, Vlad Tenev, is expected to testify before Congress.

  • This comes after allegations of market manipulation were lobbied against trading application and hedge funds.

  • Robinhood suspending buy orders of GameStop (GME) stock but not sell orders.

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It’s been a wild week for Robinhood, one of the first zero transaction fee trading platforms with a goal of “democratizing the stock market.”

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After a hedge fund meltdown over the GameStop (GME) short squeeze that spurred a conflict of interest, Robinhood CEO Vlad Tenev may be receiving some democracy of his own.

On Feb 18, Tenev will testify about Robinhood’s involvement in the GameStop saga in front of Maxine Waters and the House Financial Services Committee (HFSC). People from all walks of life have voiced the need for a robust investigation.

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When Ted Cruz and AOC Agree

On Thursday, Jan 28, Lawmakers from both sides of the aisle criticized Robinhood’s decision to disable users from buying GME stock. Traders could, however, still sell, a situation that likely only benefitted the hedge funds shorting the stock.

From right-wingers like Ted Cruz to left-wingers like Alexandria Ocasio-Cortez, this bi-partisan alignment was the precursor of what’s to come. Maxine Waters, the chair of the HFSC, stated on Sunday,

“I am concerned about whether or not Robinhood restricted the trading because there was collusion between Robinhood and some of the hedge funds that were involved with this.” 

The trading firm declared that it had shut down the trading of popular stocks on the financial Reddit forum WallStreetBets (WSB). It also did not provide a clear reason for doing so soon enough.

Mr. Tenev explained that there was a lack of funds available at Robinhood’s clearing houses used to facilitates trades. But this still did not explain the ability to continue selling stocks.

Users later pointed out that Melvin Capital, one of the major shorters of GME, owns a sizeable share of Robinhood, pointing to possible collusion.

Robinhood: A Digital “Occupy Wallstreet”

The situation started with a group of financially focused Redditors who saw market manipulation at play. Tired of a two-sided system, many had had enough and decided it was time to fight back.

This led to an unprecedented GME stock pump, decimating hedge funds and causing Melvin Capital to lose 53% on its investments in January.

This digital uprising likely represents a new era of the internet hive mind where users can align towards a common goal. But how will this affect hedge funds and trading applications of the future?

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Harrison is an analyst, reporter, and lead specialist at BeInCrypto based out of Tel Aviv, Israel. Harrison has been involved in the cryptocurrency space since late 2016 and is passionate about decentralized ledger technology and its potential.

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