Maxine Waters, the chairwoman of the House committee on financial services, took a stern tone with executives involved in the hearing on Thursday.
She frequently interrupted Robinhood CEO Vlad Tenev, demanding he actually answer the questions she was posing as he meandered around the point. Waters stated “yes or no, answer the question” a minimum of ten times in the first hour of the hearing.
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Reddit CEO Steve Huffman explained in his opening statement how Reddit moderation works, what the r/WallStreetsBets community is, and how Reddit dealt with the January stock buy-up.
He said WallStreetBets is a “real community” with real users.
He added that Reddit’s content policy prohibits “hate, harassment, bullying and illegal activity” and that threats or harassment of Plotkin and others were removed.
“A few weeks ago, we saw the power of community in general and of this community in particular when the traders of WallStreetBets banded together at first to seize an investment opportunity not usually accessible to retail investors, but later more broadly to defend all retail investors against the criticism of the financial establishment,” Huffman said.
Later, a member of that community testified. Reddit user “Roaring Kitty”, real name Keith Gill, started his opening statement by telling lawmakers “I am not a cat”.
He stressed that he is simply an individual talking about this investment choices, not making suggestions for investments in any official or professional capacity. The goal of his posts, and of the Reddit community, was to make trading more understandable and accessible to the average person.
“It’s alarming how little we know about the inner workings of the market,” Gill said.
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Gabriel Plotkin, CEO of one of the hedge funds hit by the coordinated Reddit trades, claims Melvin did not coordinate or ask for Robinhood’s ban on trading.
The GameStop frenzy targeted hedge funds like Melvin with huge short positions in GameStop, which had bet the share price would fall and stood to cash in when it did so. After the Reddit-fueled surge, the fund lost 53% in January. It reportedly received a $2bn+ capital infusion from Citadel as its losses grew.
“To be sure, Melvin was managing through a difficult time, but we always had margin excess and we were not seeking a cash infusion,” Plotkin said.
He says he was the subject of antisemitic and threatening posts on Reddit surrounding the markets incident.
“I want to make clear at the outset that Melvin Capital played absolutely no role in those trading platforms’ decisions,” said Plotkin. “In fact, Melvin closed out all of its positions in GameStop days before platforms put those limitations in place.”
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Ken Griffin is the billionaire owner of hedge fund Citadel and high-speed trading firm Citadel Securities, which works with Robinhood.
He said in testimony on Thursday that the firm provided securities to meet investors’ needs during the unprecedented surge of trading of GameStop stocks, but had “no role” in the decision made by Robinhood to restrict trading of those stocks.
The incident “reflects the competence of our firm’s ability to deliver in all market conditions”, he said.
We are off running with some opening statements from the biggest players in the Reddit-fueled stock market meltdown.
First, Robinhood CEO Vlad Tenev spoke about how he came to found Robinhood, talking of his childhood in Bulgaria, where the financial system was “on the verge of collapse”. Tenev said he wanted to give more people access to financial systems.
“We created Robin Hood to economically empower all Americans by opening mutual markets to them,” he said.
He referenced just how much money has been created by Robinhood investments, saying “the total value of our customers’ assets on Robinhood exceeds the net amount of money they have deposited with us, over $35bn”.
Next, Citadel CEO Kenneth Griffin and Melvin Capital CEO Gabriel Plotkin will speak.
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House committee hears testimony from those involved in trading controversy
The House financial services committee will hear testimony from parties involved in the recent trading in GameStop, AMC cinemas and other companies whose share values soared to astronomical levels as small investors piled into the stocks.
We’ll follow the hearing live throughout the day – stay tuned.
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