Gazzilionaire Citadel hedge fund operator Ken Griffin has been summoned to Washington—and it’s not for a tour of the monuments. Griffin is anticipated to testify before Congress. He’ll be grilled on his firm’s involvement with the imbroglio of a Reddit social media mob of young novice investors and experienced hedge funds battling over a small group of story stocks, such as GameStop.
Robinhood CEO Vladimir Tenev 🧛♂️will also be there. Tenev, the face of Robinhood, is expected to answer questions regarding why he prohibited investors from buying shares of “meme stonks,” while hedge funders were free to trade. It would be interesting if the politicians would talk about the trading app’s compliance policies and procedures, which allowed a young college kid to engage in risky, speculative trading. The novice investor thought he lost over $700,000 and later died by suicide. There has been much criticism about Robinhood over its marketing to inexperienced people—enticing them to trade stocks and options. There are claims that its platform makes it feel as if the customers are playing a video game and not real money that’s being traded—gamification.
House Financial Services Committee Chair Maxine Waters (D-Calif.) has asked for Melvin Capital Management, the short-selling hedge fund, to pay a visit too. Hopefully, Congress members will be prepared and ask tough questions. In the past, when Congress demanded Mark Zuckerberg, Jeff Bezos and other high-profile executives to appear, the proceedings only served to highlight how uninformed and incompetent our political leaders really are.
The hearing should provide lawmakers the opportunity to directly hear from all of the key players involved with the recent trading frenzy and chaos. They ought to look into allegations of pump-and-dumps schemes, market manipulation and other games played that disadvantage average investors.
The investigations should also include calls for greater regulations of online trading apps, short-selling rules, broker solvency and social media-hyped stocks. The lawmakers must talk about reforms to better protect retail investors—many of whom lost money on these stocks because they didn’t understand the associated risks.