The links between trading app Robinhood, Citadel hedge, Melvin Capital, and GameStop are becoming clearer as the Internet flares up over accusations of market manipulation.
Melvin Capital was one of the largest sellers of GameStop or GME stock cards. When a number of Redditors – and players – on the r / Wallstreetbet subreddit hit back at the funds that were trying to destroy the popular video game store for bricks and mortar, GameStop’s share price surged. This turned the situation around with two cases and left the company vulnerable: investors are likely to lose billions.
Citadel and Point72 Asset Management came to the aid of the investment firm on Monday, however, investing $ 2.75 billion in two files and solving the problem, while the company appears to be looking for more permanent solutions.
In a few days, Robinhood will continue to restrict trading with GME and others, effectively preventing retail investors from buying more shares. While still significantly higher than it was earlier this month, GME is currently down in half, from $ 462.42 to $ 231.57 at time of publication.
It looks like the drop in GME prices at this time will be in favor of two coils. However, for a trading app like Robinhood, which claims to “democratize finance for everyone,” many question the motivations behind the platform, which is suddenly limiting trades on many of the stocks that Redditors have pumped up.
According to a June report by the Financial Times, Robinhood’s $ 39 million in revenue came from an inflow of orders for shares and options from Citadel Securities, a market subsidiary of Citadel. At the time, this accounted for over 35% of the trading platform’s income.
In short, Citadel is one of Robinhood’s largest customers. Citadel invested in Melvin, which could potentially be in trouble because a group of Reddit investors decided they didn’t like the big hedge telling the market to crush GameStop. Many Reddit members have used Robinhood to buy GameStop stock. Robinhood now has very limited trading on GameStop.
It has not yet been decided whether this case can be demonstrated in court as market manipulation, but there are many allegations on social media. Many people are looking for a connection between these hedge funds and Robinhood ahead of limited deals that prove Citadel “encouraged” the trading platform to play ball or that Robinhood informed them that they intended to stop buying GameStop and others.
Twitch co-founder Justin Kahn said on Twitter that he was informed that Citadel “uploaded their shorts” to GameStop before Robinhood stopped buying. Dave Portnoy, founder of Barstool Sports, who briefly entered the cryptocurrency industry last year, accused Point72 founder Stephen Cohen of being “actively involved in today’s crime incidents by providing hedge funds at the expense of ordinary people.” Cohen flatly denied the accusations.
Meanwhile, at least three US lawmakers have called for an investigation into Robinhood’s actions, and class actions have been filed against the trading platform in federal courts in Illinois and New York.
Democratic Senator Sherrod Brown said today that he plans to hold a hearing on “the current state of the stock market.”