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Robinhood CEO was met by most of the fury owing to the fact that the app denied retail investors a chance to trade securities amid heightened volatility.
The House Financial Services Committee today hosted the GameStop Corp (NYSE: GME) squeeze main participants to unearth what transpired. In attendance were Robinhood CEO Vlad Tenev, Reddit CEO Steve Huffman, Citadel CEO Ken Griffin, and Keith Gill alias the WallStreetBets ring leader. The hearing was entitled “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide.” Notably, the Congress lawmakers grilled the participants for over five hours but more focus was given to Robinhood and its decisions.
Apparently, the hearing was the first among a serious planned hearing on the matter, according to Committee Chairwoman Maxine Waters. “Many Americans feel that the system is stacked against them, and no matter what, Wall Street always wins,” she said. “In this instance, many retail investors appeared motivated by a desire to beat Wall Street at its own game.”
She further highlighted that the committee and the congress will work to protect the retail investors who have for long been oppressed. “And, given the losses that many retail investors have sustained as a result of volatility in the system, there are many whose belief that the system is rigged against them has been reinforced,” she added. “Others have noted that there are winners and there are losers on every trade in our financial markets.”
Congress on Robinhood and GameStop Saga
Robinhood CEO was met by most of the fury owing to the fact that the app denied retail investors a chance to trade securities amid heightened volatility. In his defense, Tenev said the restrictions were not made to bail out hedge funds but to meet the requirements. “There are two points I want to make clear about the temporary restrictions: First, Robinhood Securities put the restrictions in place in an effort to meet increased regulatory deposit requirements, not to help hedge funds. Second, Robinhood immediately secured additional funds,” Tenev noted.
Previously, Robinhood agreed to pay the United States Securities and Exchange Commission a fine of $65 million for misleading investors to be a commission-free trading application. A clear manifestation that the platform has been making money from misleading retail investors for years.
On the other hand, Griffin distanced Citadel from the Robinhood trade restrictions during the hearing. “I first learned of Robinhood’s trading restrictions only after they were publicly announced,” Griffin noted.
The GameStop squeeze saw Gill flip his $50k investment to $50 million. However, the restrictions by Robinhood are said to have cost retail investors huge profits in the name of hedge fund managers.
Although there was no amicable solution found during the first hearing, there are proposals already on the table. The notable one is the use of blockchain technology and tokens to ensure system credibility.