LIVE: Reddit, Robinhood Leaders Testify to House Panel on GameStop Stock Frenzy

(Feb. 18) Watch live as the House Financial Services Committee holds a hearing on Thursday about a stock that shook markets and fascinated millions around the world just a few weeks ago: GameStop. According to plans, members of Congress will seek answers on everything from short selling and market manipulation to short squeezes and the “gamification” of trading.

Robinhood Markets and Citadel, central players in the GameStop Corp. saga that riveted markets last month, plan to deliver a unified message to U.S. lawmakers Thursday: conspiracies swirling in Washington that they worked together to harm retail investors are categorically false.

Robinhood Chief Executive Officer Vlad Tenev, whose firm has faced a barrage of questions into whether hedge funds such as Citadel ordered it to prevent customers from adding to their GameStop bets, called such claims “market-distorting rhetoric.” Robinhood halted trades due to demands from its clearinghouse that it post more capital to deal with increased risk, he said in written testimony for a hearing before the House Financial Services Committee.

Ken Griffin, Citadel’s billionaire founder, said in his prepared remarks that he learned Robinhood had barred GameStop buy orders after the restrictions were publicly announced. “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,” said Griffin, whose financial empire includes a hedge fund and massive market-maker Citadel Securities.

Digging into the relationship between Robinhood and Citadel has been a focal point for lawmakers since small-time investors revolted in January after Robinhood temporarily blocked their push to drive GameStop and other stocks to the stratosphere. Citadel Securities pays Robinhood for the right to execute its customers’ orders, and a theory that gained traction on social media is that Griffin’s market-maker leaned on Tenev’s brokerage to benefit Citadel’s hedge fund -- an assertion both firms have repeatedly rejected.

Thursday’s hearing, still expected to be full of drama and tense moments even though it’s virtual, will offer members of Congress their first chance to grill the executives on frenzied trading that triggered alarm bells from Wall Street to Capitol Hill. Chairwoman Maxine Waters, a California Democrat, has said she wants to scrutinize all the players involved to assess whether Washington needs to curtail the influence of hedge funds and strengthen guardrails for retail investors.

Gabe Plotkin, a hedge fund manager whose firm took heavy losses during last month’s Reddit-fueled trading, plans to tell Congress that he was “humbled” by the experience.

“Melvin Capital played absolutely no role” in the decisions of trading platforms to limit the buying and selling of GameStop shares, according to Plotkin’s written testimony. “In fact, Melvin closed out all of its positions in GameStop days before platforms put those limitations in place.”

Plotkin used his testimony to clarify that Melvin Capital wasn’t “bailed out” by the $2.75 billion it received from Citadel, Point72 Asset Management and others last month. Even though the firm was going through a “difficult time,” it always had adequate funding and wasn’t seeking a cash injection. Citadel proactively reached out to become an investor, seeing it as an opportunity to “buy low,” Plotkin said in his remarks.

Melvin Capital lost billions closing out its GameStop position and reducing other wagers. The firm’s assets fell to about $8 billion in January after starting the year with $12.5 billion.

Keith Gill, a Reddit user known as “Roaring Kitty” who is credited with inspiring GameStop’s rally, will testify that he was merely an individual investor using public information to study companies. Gill, one of the most influential participants pushing GameStop on the WallStreetBets Reddit forum, was sued this week in Massachusetts for misrepresenting himself as an amateur investor and profiting by artificially inflating the price of the stock.

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