In GameStop saga, Robinhood is cast as villain
Politicians from both parties wanted to identify a villain for the mania that surrounded the trading in GameStop stock last month that roiled the markets, alarmed Wall Street and made winners and losers of many small investors. On Thursday, at a congressional hearing conducted via videoconference, members of the House Financial Services Committee took aim at Vlad Tenev, CEO of Robinhood, the free trading app that fueled much of the buying and selling.
“You are at the center of this,” Rep. David Scott, D-Ga., told Tenev. “Don’t you see and agree that something very wrong happened here?”
Lawmakers called the hearing to try to make sense of why the stock of GameStop had attracted so many small investors in late January. They also wanted to know whether Wall Street players that were involved in the trading benefited at the expense of those small investors, and whether the events highlighted shortcomings of market structure or regulation.
But mostly, they wanted to know if Robinhood was encouraging customers to take unnecessary risks and making money at their expense.
Also called to testify were Kenneth C. Griffin, founder of Citadel, a hedge fund, and Citadel Securities, a trading firm; Gabriel Plotkin, founder of a hedge fund that lost money on GameStop; Keith Gill, an individual investor whose bullish posts about GameStop drove some of the buying; Steve Huffman, CEO of Reddit; and Jennifer J. Schulp, a financial markets expert.
Most of the panelists were major players during a two-week period last month when millions of small investors egged on one another via Reddit and other online forums to buy GameStop, driving the stock to stratospheric levels. The small investors’ brokerage of choice was Robinhood.
Tenev, who struck an apologetic tone for much of the hearing, did provide some of the first hints of how Robinhood customers had performed broadly when he said that they had $35 billion in paper gains.
But Rep. Jim Himes, D-Conn., pointed out that the figure did not mean much without knowing how much the customers began with. Himes pushed Tenev to give any indication of how customers have performed relative to other investments. Tenev declined to answer.