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Robinhood, Reddit and Citadel Testify – Here Are the Testimonials

testimony before congress
4zeva on Deposit Photos

What a meeting! On Feb. 18, Robinhood – and other key players in the GameStop fiasco – testified before Congress for five hours. They discussed a lot, from Robinhood’s business model and gamification of the stock market to Citadel’s business practices. Here’s the rundown on the testimonials from Robinhood, Citadel, Melvin Capital and Reddit.

Robinhood CEO

Out of all the other witnesses, Robinhood was asked the most questions, even to the point of defaming the broker. Vlad Tenev, the CEO of Robinhood, apologized for his company’s failures and, more specifically, restricting traders from buying $GME and other meme stocks. In hindsight, he admits they could have handled the situation better.

Also, Tenev stated that his company didn’t prioritize Wall Street business partners over retail users or break any laws. “We don’t answer to hedge funds,” he said. He continued, saying that Robinhood is the reason why many first-time investors are getting into the market in the first place. 

Citadel CEO

Ken Griffin faced harsh questioning about Citadel’s business practices, more specifically paying brokers for their customer orders so they could execute the trades. The examiners also asked if there was a hidden fee that customers don’t know about. However, like Tenev, Griffin was often cut off while explaining the way Citadel does business. Still, he continued to say that his company had nothing to do with Robinhood and other brokers halting trade. 

Melvin Capital CEO

Melvin Capital was one of the biggest hedge funds that shorted $GME stock; it lost around $6 billion to retail investors. CEO Gabe Plotkin explained that Melvin Capital has been shorting $GME for years and that even though the hedge fund lost a lot of money, their losses were manageable. Also, Citadel invested billions into Melvin Capital to help their losses, which Plotkin denied was a bailout.

Reddit CEO

Steve Huffman was asked questions about the Reddit group Wallstreetbets. He said that they are an “eccentric” bunch of people, but they didn’t breach any platform terms or services or commit market manipulation. Huffman also said that all of the financial analyses by Reddit users are among the best: Each post has to be vetted by votes. This system requires a post to be endorsed by thousands of users before it is visible on the site.  

Will there be Congressional action?

You can’t easily fix the situation from this one Congressional hearing. The government has to go through a lot of red tape to pass laws. We probably won’t see any actions taken soon – if at all. It’s been three weeks since the $GME incident, and we haven’t seen a repeat.

As new problems arise in the world, the moment for change has been passing. Focus has turned to more important and immediate dilemmas like the pandemic and the freezing weather wreaking havoc throughout the country.

Also, there is no clear path for solving issues such as the gamification of investing. This was more of a political show to highlight the underlying issues of the current market. Change is less likely to happen from the legislative branch, and if there is any change, it will probably be from regulators like the Securities and Exchange Commission (SEC).

What do you think of these testimonies? Do you forgive these companies for what they’ve done? Let us know in the comments.

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