Gamestop crime case for Congress: Robinhood boss defends himself against allegations

Gamestop crime case for congress
Robinhood boss defends himself against allegations

Why did online broker Robinhood restrict Gamestop stock trading? The question already preoccupies several courts. Before the US Congress, Robinhood boss Tenev vehemently rejects allegations of collusion with hedge funds.

The head of the online broker Robinhood Markets, which got caught in the crossfire of criticism during the Gamestop stock turmoil, has rejected allegations of alleged collusion between his company and major investors before the US Congress. "Let me make it clear right from the start: Any allegations that Robinhood has helped hedge funds or other special interests – to the detriment of our own clients – are absolutely false," said Vlad Tenev in his response to the eagerly awaited Financial Services Committee hearing US House of Representatives.

In addition to Tenev, the head of the online platform Reddit, Steve Huffman, and the top managers of the hedge funds Citadel and Melvin Capital Management had to answer questions from US politicians. Keith Gill also testified – a Youtuber known as "Roaring Kitty", who is considered the driving force of the investing community that fueled the breathtaking price rally for Gamestop shares in January.

The first of several planned congressional hearings was intended to discuss how the extreme price volatility could come about and what roles social media, online brokers such as Robinhood and professional financial market speculators such as hedge funds played in it. Above all, the fact that Robinhood and other platforms restricted trading in the overheated shares of Gamestop and other companies such as the cinema chain AMC during the price explosion last month caused a lot of anger among investors and outrage among politicians. The Texas attorney general Ken Paxton, for example, started an investigation on suspicion of collusion between hedge funds and brokers like Robinhood and said: "It stinks of corruption".

Judicial authorities investigate Gamestop case

The SEC and the Treasury Department are also investigating the gamestop hype. According to the US media, judicial authorities are also involved. In January in a Reddit forum organized hobby speculators like Gill had a showdown with hedge funds when they bid for the Gamestop shares, which bet on a price decline and suffered heavy losses.

In the midst of the threatening rally for major investors, Robinhood temporarily restricted trading so that the shares could only be sold. The company thus received loud criticism and exposed itself to allegations of discriminating against the Wall Street establishment for small investors. The case is already preoccupying the courts – several investors who feel cheated have sued Robinhood.

Company boss Tenev has now confirmed to the MPs that the restrictions were necessary due to the increased need for collateral because of the sudden massive surge in trade. Hedge funds had no influence whatsoever. Robinhood raised a total of $ 3.4 billion from investors at the height of the market turmoil to bolster its capital base.

Tenev apologizes to investors

Tenev apologized to the affected investors – Robinhood certainly did not do everything perfectly in the situation. Citadel boss Kenneth Griffin also denied cheating: there was "absolutely no" collusion between his fund and Robinhood.

Keith Gill, the man behind the YouTube profile "Roaring Kitty", was himself the target of a potential class action lawsuit this week. The internet star is accused of violating securities laws with his Gamestop campaign and of having made enormous losses to other investors. Gill is a licensed finance professional who posed as an amateur to small investors in order to get them to buy overpriced stocks, according to the lawsuit filed in Massachusetts on Tuesday. The plaintiff is a US investor who speculated on options on Gamestop shares. He is represented by the well-known US law firm Hagens Berman.

Gill reiterated at the hearing that he is not a professional investor and does not provide financial advice. Compared to most of the other witnesses summoned, the Youtuber rarely had a say. In his prepared statement, he had already clearly rejected allegations of having enriched himself in a dubious way through the Gamestop hype. Gill assured him that he had not instigated anyone to trade in stocks in order to profit from them himself. The idea that he used social media to advertise Gamestop shares to ignorant investors is "absurd".

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