Key players in last month’s stock-trading frenzy involving GameStop and other companies will testify before Congress Thursday, including billionaire Citadel founder Ken Griffin and Robinhood CEO Vlad Tenev.
Other names appearing before the House Financial Services Committee on the matter include Reddit co-founder and CEO Steve Huffman, Melvin Capital founder Gabe Plotkin and Keith Gill, also known as “Roaring Kitty,” who set off the buying firestorm on Reddit and YouTube.
Last month, shares of GameStop and AMC multiplied in value as traders on the Reddit forum “WallStreetBets” pumped them, only for them to seesaw after trading app Robinhood blocked investors from being able to buy.
The company defended itself at the time, but could not quell outrage among users who have turned their short squeezing of big hedge funds and banks into a crusade, and those who were watching the madness unfold in the markets.
Robinhood’s handling of the event sparked bipartisan calls for a probe in Congress, from Rep. Alexandria Ocasio-Cortez (D-NY) to Sen. Ted Cruz (R-Tx.) demanding answers.
Griffin and Tenev will each call on Congress to shorten the time required for settling stock trades, according to transcripts of opening remarks released ahead of the hearing.
Currently, stock trades require two business days between when they are executed and when they are settled.
Griffin will testify that there should only be one day, while Tenev will call for trades to be settled in real time.
Tenev will also address the allegations that his trading company knowingly harmed its customer base to prevent hedge funds from losing considerable capital.
“The buying surge that occurred during the last week of January in stocks like GameStop was unprecedented, and it highlighted a number of issues that are worthy of deep analysis and discussion.
“I’m looking forward to addressing those issues today, but I want to be clear at the outset: any allegation that Robinhood acted to help hedge funds or other special interests to the detriment of our customers is absolutely false and market-distorting rhetoric,” a transcript of his remarks reads.
“Our customers are our top priority, particularly the millions of small investors who use our platform every day to invest for their future.”
Griffin, meanwhile, will distance Citadel from Robinhood’s actions after public scrutiny fell on him and the firm for paying to execute the app’s trades, a legal practice that nonetheless caused outrage on Reddit boards and has garnered the attention of politicos like Sen. Elizabeth Warren.
“I want to be perfectly clear: we had no role in Robinhood’s decision to limit trading in GameStop or any other of the ‘meme’ stocks,” the billionaire investor will say in his opening statement. “I first learned of Robinhood’s trading restrictions only after they were publicly announced,”
Gill, the star Reddit trader, will stand by his bullish GameStop calls, despite being slapped with a lawsuit for his role in the trading frenzy.
“Social media platforms like YouTube, Twitter, and WallStreetBets on Reddit are leveling the playing field,” Gill will say. “And in a year of quarantines and COVID, engaging with other investors on social media was a safe way to socialize. We had fun.”
“The idea that I used social media to promote GameStop stock to unwitting investors is preposterous. I was abundantly clear that my channel was for educational purposes only, and that my aggressive style of investing was unlikely to be suitable for most folks checking out the channel.”
Huffman plans to defend the WallStreetBets forum in his opening remarks, arguing that the 9.1 million-member message board is an online community with “significant depth.”
“WallStreetBets may look sophomoric or chaotic from the outside, but the fact that we are here today means they’ve managed to raise important issues about fairness and opportunity in our financial system,” his prepared remarks read.
The House Financial Services Committee is investigating how massive retail trading pushed certain stocks sky so high. GameStop’s stock soared from trading for under $20 a share in the beginning of January to a high of $347.51 on Jan. 27, more than 1,600 percent.
The recent drama has highlighted the potential for market manipulation by social media, mobile trading apps, broker solvency and short-selling rules.
