(Bloomberg) – Ken Griffin, the billionaire founder of Citadel, is due to testify next week at a House hearing on the violent market swings in GameStop Corp. and other actions, according to three people familiar with the matter.
Vladimir Tenev, CEO of Robinhood Financial, is also expected to answer questions about the role that the company’s popular online trading app played in the turmoil, people said, asking not to be identified before a formal announcement. The chairman of the House’s Financial Services Committee, Maxine Waters, a California Democrat, said she wants the panel to hear the hedge fund Melvin Capital Management as well.
Spokesmen for Citadel, Melvin Capital and Robinhood declined to comment. A spokeswoman for the Chamber’s Financial Services Committee did not respond to a request for comment.
Read more: What Citadel and Griffin have to do with GameStop
The hearing will give lawmakers the first chance to hear directly from executives whose companies were at the center of a storm that shook Wall Street and reverberated far beyond its trading floor. The frenzy, initiated by retail investors who flooded the Reddit forums with optimistic posts on GameStop, sparked investigations into potential market manipulation and calls for greater scrutiny of mobile trading apps, short selling rules, broker solvency and social media.
Representative Patrick McHenry of North Carolina, the top Republican on the Financial Services Committee, said it is important to know whether the laws have been violated beyond what has created the atmosphere for market volatility. Senate Banking Committee Chairman Sherrod Brown has also indicated that he plans to hold a hearing on the matter, while fellow Democrat Elizabeth Warren asks Robinhood to explain why he has restricted some GameStop negotiations amid volatility.
Robinhood, Citadel and Melvin are all central actors in the drama. Most retail investors used the Robinhood platform to place their bets on GameStop before the brokerage restricted its customers from buying shares in the video game retailer. Warren said in his letter that Robinhood’s trading limits raise “worrisome concerns about his relations with the major financial institutions that carry out his trades, particularly Citadel Securities.”
Griffin is a major Republican donor who controls one of the largest hedge funds, in addition to Citadel Securities, the market maker who manages much of Robinhood’s trading. Investment firm Citadel – a separate entity from the market maker – together with Griffin and others injected $ 2 billion into Melvin Capital, a hedge fund managed by Gabe Plotkin that suffered heavy losses from its short bets against GameStop when the shares fired.
Citadel Securities performs about 39% of all the average daily retail volume listed in the United States, according to its website. Robinhood has repeatedly said it has temporarily restricted customers from buying GameStop because of collateral demands, while Citadel has been adamant that it played no role in the actions taken by Robinhood.
Herds of individual traders brought GameStop down, which started the year as a heavily shorted stock at around $ 18 and rose to $ 483 before backing down. The Securities and Exchange Commission is combing online posts for signs that the fraud has fueled the wild ride, according to people familiar with the matter.
Lawmakers can ask about possible reforms to better protect retail investors who have driven the increase. Some suffered losses, raising concerns that they took risks that they did not understand or could not afford.
GameStop jumped as much as 25% to $ 62.83 in New York trading on Wednesday, the highest since February 5. The stock has fallen more than 80% since closing at a $ 347.51 high on January 27.
(Updates to add additional background in the last five paragraphs)
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