The CEO of online stock brokerage Robinhood is expected to testify before a House committee on Feb. 18 as lawmakers dig into the firm’s role in the tumultuous trading of GameStop stock and other companies, people familiar with the matter said.
The hearing before the House Financial Services Committee with Robinhood CEO Vlad Tenev, which has not been formally announced, is primed to be a blockbuster. Share prices of GameStop and other struggling companies skyrocketed last week in part thanks to traders on the social media website Reddit targeting Wall Street hedge funds, which were betting heavily that the stock price would fall. Some of the investors betting against the companies subsequently suffered huge losses.
Robinhood’s decision on Thursday to stop its customers from buying the stocks sent GameStop’s shares plummeting, drawing criticism of the brokerage from Rep. Alexandria Ocasio-Cortez (D-N.Y.), Sen. Ted Cruz (R-Texas) and other lawmakers on both sides of the aisle.
House Financial Services Chair Maxine Waters (D-Calif.) and other Democrats are vowing to investigate what role Wall Street hedge funds may have played in the move to halt trading.
Robinhood, which has grown rapidly as an easy-to-use platform for individual stock traders, says it limited trading to meet financial obligations triggered by the spike in trading.
“I am concerned about whether or not Robinhood restricted the trading because there was collusion between Robinhood and some of the hedge funds that were involved with this,” Waters said on MSNBC this weekend.
It was not clear if Democrats would ask other financial institutions to testify. Democratic lawmakers are also examining the role of firms owned by billionaire Ken Griffin. The two companies —the hedge fund Citadel and trading firm Citadel Securities — denied responsibility for any broker’s decision to suspend trading. Citadel bailed out a hedge fund that suffered from GameStop’s stock increase and Citadel Securities pays Robinhood to execute its stock trades.
Rep. Al Green (D-Texas), who chairs the Financial Services Oversight Subcommittee, is focused on Citadel’s role in the GameStop saga. He said Monday he wants to know “whether or not there was something about this relationship that caused Robinhood to act, or did Robinhood act because of reasons associated with its liquidity.”
Robinhood declined to comment on the hearing. A Waters spokesperson did not respond to a request for comment.
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