GameStop Congressional Hearing: Robinhood, Citadel Deny Collusion In Prepared Remarks

On Thursday, a Congressional committee will attempt to sort through the stock market drama surrounding Reddit’s WallStreetBets, the trading app Robinhood, hedge fund Citadel Securities and stocks like GameStop Corp. GME that recently experienced extreme surges in volatility.

The House Financial Services Committee is holding a hearing at noon Thursday at which the CEOs of Reddit, Robinhood, Citadel Securities and Melvin Capital will testify about the circumstances that led to Robinhood restricting buying in GameStop and other popular WallStreetBets stocks.

Related Link: Congressional Hearing On GameStop Ahead: What Investors Need To Know

WallStreetBets poster and GameStop trader Keith Gill, also known as Roaring Kitty, will also testify.

In preparation for the hearings, all the parties who will be testifying have released prepared remarks. Here’s a summary of what they had to say.

Robinhood, Reddit On Defense: Robinhood CEO Vladimir Tenev said customers remain the company’s top priority.

“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,” Tenev wrote.

He added that the trading restrictions Robinhood put in place were so the company could meet its clearinghouse deposit requirements to support customer trading.

Reddit CEO Steve Huffman said Reddit has found no evidence bots, foreign agents or any other bad actors meaningfully infiltrated the WallStreetBets community to manipulate the markets.

“In every metric that we checked, the activity in WallStreetBets was well within normal parameters, and its moderation tools were working as expected,” Huffman wrote.

Huffman said online retail investing communities like WallStreetBets must be protected to ensure fairness and opportunity in financial markets.

Melvin, Citadel Claim Deny Influence: Melvin Capital Management founder and CIO Gabe Plotkin said Melvin Capital played no role in influencing trading platforms’ decisions to restrict trading in GameStop, and his fund closed out all positions in GameStop days before the restrictions were enacted.

Plotkin also said reports stating that Melvin was bailed out by Citadel are false.

See also: Robinhood Alternatives

“To be sure, Melvin was managing through a difficult time, but we always had margin excess and we were not seeking a cash infusion,” Plotkin wrote.

WallStreetBets poster and GameStop trader Gill said the idea that he was promoting GameStop online as part of a pump-and-dump scheme is “preposterous.”

He says he still believes GameStop has an extremely bright future in a thriving $200-billion gaming industry.

“I believe an analysis of GameStop’s recent price action must start with a discussion of the exorbitant short interest in the stock, as well as an investigation into any potentially manipulative shorting practices and brokers’ reported failures to timely deliver shares and settle trades,” Gill wrote.

Ken Griffin, CEO of Citadel, said Citadel was the only major market maker to provide continuous liquidity throughout the most volatile period of the recent WallStreetBets “meme” stock frenzy.

“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,” Griffin wrote.

Griffin also defended payment for order flow, which he said is the primary reason retail traders can trade for free on apps like Robinhood.

No Systemic Risk, Expert Says: Jennifer Schulp, director of financial regulation studies for the Center for Monetary and Financial Alternatives at the Cato Institute, said there is no need for new regulations restricting retail investor access to the market.

“Importantly, the temporary volatility in GameStop and others did not present a systemic risk to the functioning of our markets,” Schulp wrote.

She said it’s difficult to analyze the GameStop short squeeze at this point because it’s unclear exactly who was buying the stock and what their true motivations were.

Photo courtesy of Robinhood.