Robinhood CEO Vlad Tenev on Friday refuted the ‘conspiracy theory’ that hedge funds led his company to stop trading on GameStop.
During an interview with Yahoo Finance, Tenev was asked to clarify why the mobile phone broker made the decision to restrict trading involving GameStop shares, as prices soared last week.
“Ah, based on this conspiracy theory, I think I have said it several times that it is not true,” said Tenev.
‘Our decision to temporarily restrict customers from buying certain securities had nothing to do with a market maker or a market participant or anyone like that pressuring us or asking us to do so.
“It was entirely about market dynamics and the clearinghouse’s deposit requirements, as per regulations,” he added.
Robinhood CEO Vlad Tenev (right) on Friday refuted the ‘conspiracy theory’ that hedge funds led his company to halt GameStop trading
Calling the allegations of conspiracy theories, Tenev (pictured) said: ‘Our decision to temporarily restrict customers from buying certain securities had nothing to do with a market maker or a market participant or anyone who pressured us or asked to do that ‘
On Thursday, Robinhood began restricting the purchase of GameStop shares and several other shares, sparking outrage that small investors were blocked while large hedge funds and wealthy investors were free to buy and sell.
Robinhood’s restrictions on GameStop’s actions have sparked furious accusations that the company was trying to target the shares for nefarious purposes, but Tenev continued to deny those allegations.
The big hedge funds suffered an estimated loss of $ 19 billion in their bets against GameStop.
GameStop’s stock ended Friday with an increase of almost 70 percent, with Robinhood easing restrictions on the purchase of the unlikely market darling, even as the broader market plummeted, with the Dow dropping 620 points amid concerns about the spreading effects of the bubble.
Shares in the AMC cinema chain, which, like GameStop, were heavily shorted, rose 54%.
Targeted by a campaign on the Reddit online message board to ‘squeeze’ the hedge funds that bet against the stocks, GameStop’s shares have risen about 1,800% since the beginning of the month, as the ‘meme stock’ insurgency ‘gained strength.
So far, the gains and losses of each side in the battle are mostly on paper, with each side hoping to outlive the other before withdrawing money.
But as of Friday, investors who bet against GameStop are sitting on losses of around $ 19 billion, with the loss reaching $ 10 billion only on Wednesday, when GameStop’s shares rose 135 percent. percent, according to Ortex data provided to Business Insider.
Although their specific losses are not revealed, hedge funds Melvin Capital, Citron and Maplelane LLC are known to be among those who took massive positions betting that GameStop’s stock price would fall.
Claims also circulated on social media that Robinhood was forcibly selling GameStop shares without the account holder’s permission, and the movements sparked furious protests.
GameStop’s shares ended Friday with an increase of almost 70 percent, with Robinhood easing restrictions on the purchase of the unlikely market darling, even as the broader market plummeted, with Dow falling 620 points amid concerns about the spreading effects of the bubble
GameStop shares rose another 67% on Friday, continuing on a surprisingly high
But Robinhood said that forced stock sales were related only to shares bought with borrowed money, or to the execution of stock options, which are contracts to buy or sell shares.
“The allegations that Robinhood proactively sold clients’ shares outside of our standard margin-related sales or stock option procedures are false,” a Robinhood spokesman told DailyMail.com on Saturday.
Buying shares ‘on the margin’ means using funds borrowed from the broker, and it is not uncommon for brokers to automatically liquidate those shares if an account falls below the minimum balance requirements. At Robinhood, users need an account balance of at least $ 2,000 to trade on the margin.
The marginal shares could have put even more pressure on Robinhood’s balance sheet, potentially leaving the broker in danger in the event of a massive collapse in GameStop’s share price.
During the interview with Yahoo, Tenev was also asked what conversations he had with lawmakers.
‘Look, I think we – everyone at Robinhood operates this company with integrity and, above all, taking care of our customers, individual investors and their best interests,’ he started.
‘Of course, we are constantly in communication with our regulators and legislators. And we continue to do that. And you know, I’m looking forward to having conversations with someone about it.
‘Because I think, obviously, it is highly technical and involves settlement mechanics, as you saw in some of your other conversations. And I think Robinhood made the right decision here, ‘he added.
The Securities and Exchange Commission suggested in a statement on Friday that it is examining the matter.
The SEC said it would “closely analyze actions taken by regulated entities that could harm investors or unduly inhibit their ability to trade certain securities”.
On Friday, Robinhood lifted the total ban on buying GameStop shares, but limited users to accumulating only one share, unless they already owned more.
Those buying limits expanded to 50 different stocks on Friday night, including blue-chip names Starbucks and General Motors, in an apparent act of desperation when the company’s cash reserves were stretched to the limit.
Vaccine makers Moderna and NovaVax were also on the list. A spokeswoman for Robinhood declined to confirm to DailyMail.com that the same stocks would be restricted on Monday, saying only that the company ‘would continue to monitor the situation and make adjustments as needed’.
The restrictions extend far beyond ‘meme stocks’, like GameStop, which attracted frantic interest this week, and indicate the precarious financial situation Robinhood could be in.
Robinhood insists that the restrictions are only temporary. “Our goal is to allow the purchase of all titles on our platform,” said the company.
“This is a dynamic and volatile market, and we have and can continue to take steps to ensure that we meet our requirements as brokers, so that we can continue to serve our customers for the long term,” added Robinhood.
Robinhood was not the only trading platform to implement trading restrictions. TD Ameritrade also had restrictions on the purchase of shares in 19 companies, most of which had heavily short shares.