Robinhood CEO Vlad Tenev is expected to testify before the House Financial Services Committee to discuss the online stock trading service's role in the GameStop short squeeze, Politico reports.
The short squeeze of GameStop began when a number of users of the subreddit r/WallStreetBets realized that GameStop stocks were being shorted above their total value. This led to the subreddit's users mass-purchasing stocks in GameStop, causing the price of the stock to skyrocket and a hedge fund which was short selling stocks in the company $5 billion in losses.
In response to this short squeeze, Robinhood shut down the purchasing of stocks in GameStop and a few other stocks affected by the short squeeze. Robinhood claimed that short squeezers were manipulating the market for the stock, while critics alleged that it was Robinhood which was actually engaging in market manipulation.
It was also later discovered that Robinhood has deep financial ties to a hedge fund owned by billionaire Ken Griffin known as Citadel. Griffin also runs Citadel Securities, the company which bailed out the hedge fund which lost $5 billion from shorting GameStop, further fueling claims of market manipulation. Citadel has denied any connection to Robinhood's decision to suspend trading in GameStop.
The actions of Robinhood sparked criticism from across the political spectrum, and many prominent Democrats including Congresswoman Maxine Waters, chair of the House Financial Services Committee, have determined that the company should be investigated. "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.
House Financial Services Oversight Subcommittee chairman Al Green, meanwhile, indicated that his committee would be investigating Citadel to determine "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."
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