Congress starts the house hearing of the CEOs of Robinhood, Citadel, and Reddit as a review of the GameStop short squeeze while lawmakers Brad Sherman and Maxine Waters were on the offensive so let’s read more in today’s cryptocurrency news.
The CEOs of Citadel, Robinhood, and Reddit testified before the Congress today as a part of the review of the GameStop short squeeze which was a retail-driven spike in the price of the stocks and the hearing was getting on a harsh tone. As Congress Starts the hearing, most of the testimonies centered on what actually happened and why Robinhood decided to restrict certain stocks on its platform. Representative Maxine Waters who chairs the House Financial Services Committee tried to keep Ken Griffin and Vlad Tenev on track insisting that they should only be answering with “yes or no.”
Things got heated when rep. Brad Sherman started questioning Griffin about the payments for order flows which is a mechanism that rewards brokers for routing trades to marker makers such as Citadel and he even accused the company of executing trades for Robinhood at worse prices than the equivalent traders for other companies:
“You are doing a great job of wasting my time. If you’re going to filibuster you should run for the Senate.”
The answer to the question of what happened in January remains unanswered but it seems that the general opinion is that traders on Reddit’s message board called r/WallStreetBets decided to pump the prices of the shorted companies like Nokia, AMC, and Gamestop and it worked. The price of the GME stock increased to over $300 while Melvin Capital, one of the hedge funds that shorted GameStop, had to make a $3 billion bailout from Citadel and Point72.
The ringleader was a guy named Keith Gill or known as the DeepFuckingValue on Reddit and he also testified, claiming that he turned an investment of $53,000 into $50 million. Robinhood on the other hand started blocking GME purchases due to “volume issues.” The next day, they started allowing new purchases but only one share per customer. Tenev explained:
“I’m sorry for what happened. I apologize. I’m not going to say that Robinhood did everything perfectly and we haven’t made mistakes in the past, but what I commit to is making sure that we improve from this, learn from it, and we don’t make the same mistakes in the future.”
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