#CitadelScandal Trends As New Lawsuit Alleges Meme Stock Conspiracy

The hashtag #CitadelScandal trended on Twitter on Thursday and Friday after a new class action lawsuit alleged that trading app Robinhood Markets Inc HOOD and market maker Citadel Securities conspired to drive down the price of GameStop Corp. GME, AMC Entertainment Holdings Inc AMC and other so-called meme stocks earlier this year.

Lawsuit Allegations: The new lawsuit revolves around whether or not Robinhood’s decision to restrict buying in meme stocks back in January came from Citadel.

Related Link: Why The New Generation Of Investors Is More Serious, Informed Than It May Appear

"On January 27, 2021, the day before the restrictions were implemented, high level employees of Citadel Securities and Robinhood had numerous communications with each other that indicate that Citadel applied pressure on Robinhood," the lawsuit alleges.

Citadel has denied the accusations in a series of tweets.

“We FIRST learned of Robinhood’s trading restrictions from posts on Twitter – as evidenced by real-time communications,” Citadel tweeted.

Citadel And Robinhood: Market makers provide liquidity to financial markets by buying and selling shares of stock. Market makers don’t typically take a long or short position in individual stocks, so when they take one position they must offset it with an opposing position.

Citadel was founded by billionaire Ken Griffin. The company includes both its market maker business and its own hedge fund, Citadel LLC.

In January, Citadel LLC and Point72 Asset Management were forced to bail out hedge fund Melvin Capital with a $2.75-billion investment due to losses Melvin suffered from a short position in GameStop.

In testimony to Congress back in February, Robinhood CEO Vladimir Tenev said Robinhood restricted GameStop buying to remain in compliance with clearinghouse deposit requirements, and Robinhood received “zero pressure from anyone” to enact those restrictions.

He said the GameStop surge was a one-in-3.5 million event, which is “unmodelable” when it comes to risk management, adding that Robinhood has already made changes to its risk management strategy to ensure that this type of event does not occur again in the future.

Both Robinhood and Citadel have denied colluding to restrict buying in GameStop and other meme stocks, but retail stock traders on Twitter aren’t buying it.

In addition to #CitadelScandal, #ApesNotLeaving, #VladTenevLied and #KenGriffinLied trended at various times on Thursday and Friday.

Benzinga’s Take: The Robinhood-Citadel conspiracy has been popular among meme stock traders since January. Nine months later, traders will finally get answers to their questions when the evidence about what did and didn’t happen back in January is laid out in court for the world to see,