A shady but powerful wall in Washington is the firm’s own moment

The GameStop saga was a David-versus-Goliath story, pitting small traders against large hedge funds and a cautionary tale of what happens when the fast-moving Silicon Valley collides with the heavily regulated world of Wall Street.

Chicago billionaire Kenneth C. One of Griffin’s ensemble is the world’s most influential and perhaps the least visible figure.

And when the House Financial Services Committee questioned the key players in GameStop Madness on Thursday, Mr. Griffin would be asked in two weeks about the two different roles played by his companies in the two-week trading frenzy that has led to billions Created and destroyed dollar property.

The first business, Garh, is a hedge fund firm that placed a small bet that Gametop’s shares would fall. Its loss came as the shares rose as millions of small investors started buying stocks, but not nearly as much as another hedge fund, Melvin Capital, which took a $ 2 billion investment from the stronghold and some of its employees financed it. Nourished.

The other business, Citadel Securities, is a wholesale broker that says it handles more than a quarter of all stock trading in the United States. It pays Robinhood and other retail brokerages for the right to complete their clients’ trades, and makes small-value discrepancies between buy and sell orders pocket money, which can add up quickly. And as small investors were fiercely buying and selling Gametop shares – many via trading apps like Robinhood – securities securities were trading briskly.

“The Citadel is one of many real financial firms that are incredibly important and interwoven throughout the financial system, but are never visible to the public,” said Denise M., president and chief executive officer of Better Markets. Keller said a non-profit organization that supports additional financial regulation. “They work in the shadows and want to live in the shadows and don’t want anyone to see how they conduct their business.”

On Thursday, lawmakers will cast a spotlight on Mr. Griffin. He is scheduled – along with Robinhood and Reddit chief executives, to testify before the House committee about the social media site – the GameStop rally. Also on the witness list is Keith Gill, a Reddit user and YouTube poster who made millions from Gametop’s business, who helped popularize him, and Melvin founder and CEO Gabe Plotkin, who helped the stronghold Was very badly squeezed.

In particular, Mr. Griffin would have to address the speculation that he used the involvement of his firms to manipulate the situation to his advantage. Small investors who were upset that Robinhood had curbed GameStop Trading suggested that Citadel had pressured Robinhood to defend its own bets against the video game retailer – a claim that Both Citadel and Robwood have denied it.

“There is a huge pacidarum going on, and it is a crazy theory that we inspired Robinhood or another firm to impose a trade ban on Gametop,” Mr. Griffin said in an interview Wednesday. “Never in my life have I seen such an absurd theory.”

Representative Maxine Waters, a California Democrat who heads the committee, said the first of three plans she made would be a fact-finding mission.

“They will tell their story,” she said of the stronghold and other witnesses. “We hope that from the hearing we will get some facts and a very clear understanding of who did what.”

For Mr. Griffin, who began trading at Harvard as a sompore, the answer to such questions would depend on exactly what the officers of his financial empire are asking for.

The stronghold – the hedge fund – had only limited holdings of GameStop and other “meme” shares that grew last month. As of Jan. 22, before GameStop went through the roof, on Friday, Citadel’s bet against GameStop was limited to just 92 shares, said a person familiar with the firm’s position at the time. But after GameStop started, Mr. Griffin – one of the financial world’s largest operators – saw an opening in Melvin.

A lieutenant of Mr. Griffin called Mr. Plotkin to express interest in the investment, Mr. Griffin said. By the end of the day, Citadel and Melvin had a deal to join hands. The stronghold and some of its senior managers will buy less than 10 percent stake in Melvin for $ 2 billion, a person familiar with the details of the transaction was not authorized to disclose its confidential details. That money, with hedge fund points 72 to $ 750 million, allowed Melvin a massive loss of the season as GameStop – a stock that had bet – would rise more than 600 percent.

Melvin’s losses were surprising: 53 percent in January. The citadel, which by then had a small risk of loss to Melvin and a loss on its Gamesoto investment, was down 3 percent. (The S&P 500 was down 1.1 percent for the month.)

But Mr. Griffin’s rise to the gametop presented to hedge funds has been linked to other roles played by his companies, particularly at Citadel Securities. And it is here that agitated investors sniff a plot.

On the morning of January 28, Robinhood, a Silicon Valley start-up that had become a destination for small investors, curbed the sale of Gametop and some other stocks. The reasons were not fully explained, and they had the immediate effect of reversing the rally.

Users were angry – first with Robinhood, and then with Citadel.

Some amateur traders, knowing that the stronghold had already invested in Melvin and that Citadel Securities had run a large trading campaign, in which Robinhood was a client, jumped to online conspiracy theories. (The arrangement, known as “Pay for Order Flow”, allows users to trade for free on Robinhood and other apps.)

“Little did I know that the Citadel holds hands in so many pockets !!” A commentator Written on Reddit’s Wall Street Bates Forum On 31 January. “Keep in mind that they own a part of the Melvin capital! They have tried to rig the market against us.”

Mr Griffin said that he and his team were paying little attention to the online chatter as they were accompanied by a huge influx of trades. On January 28, for example, Citadel Securities sold a total of 7.4 billion shares. This is equal to the volume of the entire stock market someday in 2019.

But once Mr. Griffin realized the coveted risk of the rumor mill, he put forth statements from both firms to deny any role in Robinhood’s decision to limit the business.

Mr. Griffin and other company executives said that Citadel Securities had no business reason to slow down or shut down the business model. The company collects a small difference between the price of buying and selling as a stock as a fee, and slow trading gives limited securities the ability to make money.

But according to the purpose of the citadel, with the aim of Citizen, the CEO of Vitriol, Vlad Tenev, has not come forward with the cause of the recession: heavy trading in wildly swinging stocks by Robinhood users meant that it was given a hefty security. – Pure payment was required. For clearinghouses running the industry that finalize trades.

Thursday’s hearing could reveal more about what has happened so closely inside companies at the GameShop rally, but populist fury from both sides is likely to be directed at small vendors targeting Robinhood and GameStop.

Representative Alexandria Ocasio-Cortez, a New York Democrat and a member of the Financial Services Committee, called Robinhood’s decision to stop certain trades for Gamestop in January “unacceptable.” And Rashida Talib, a Michigan Democrat representative on the committee, called the decision “beyond absurd” and accused the app of “blocking the ability of businesses to protect hedge funds.”

David McCabe Contributed to reporting.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *