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 explain why the mobile brokerage made the decision to restrict transactions with GameStop stocks when prices soared last week.
“Oh, about that conspiracy theory, I think I’ve said over and over that it’s not true,” Tenev said.
“Our decision to temporarily restrict customers from buying certain securities had nothing to do with a market maker or market participant or someone pressuring or asking us to do so.
“It was all about the market dynamics and the requirements for clearinghouse deposits, as prescribed,” he added.
Robinhood CEO Vlad Tenev (right) on Friday refuted the ‘conspiracy theory’ that led hedge funds to stop his company from trading on GameStop
Tenev (pictured) called the claims conspiracy theories, saying, ‘Our decision to temporarily restrict clients from buying certain securities had nothing to do with a market maker or a market participant or someone pressuring or asking us to do so’
On Thursday, Robinhood began limiting purchases of GameStop stock and several other stocks, sparking outrage as small investors were shut out while large hedge funds and wealthy traders were free to buy and sell.
Robinhood’s restrictions on GameStop stock led to furious allegations that the company was trying to refuel the stock for nefarious purposes, but Tenev has continued to deny those allegations.
Major hedge funds have taken an estimated $ 19 billion in losses on their bets against GameStop.
GameStop shares ended the day at nearly 70 percent on Friday, as Robinhood eased restrictions on buying the unlikely market enthusiast even as the broader market fell, with the Dow dropping 620 points over concerns about the bubble’s ripple effects.
The stock in theater chain AMC, which like GameStop was badly shorted, closed at 54 percent.
The goal of a campaign on the online Reddit bulletin board to “ squeeze ” hedge funds betting against the stocks, GameStop stocks are up about 1,800 percent since the beginning of the month when the “ meme stocks ” uprising got underway.
So far, the gains and losses for each side in battle are largely on paper, with each side hoping to outlive the other before they get paid.
But as of Friday, investors betting against GameStop will be on about $ 19 billion in losses, with damage rising to $ 10 billion alone on Wednesday, as GameStop shares surged 135 percent, according to data from Ortex provided to Business Insider.
While their specific losses are not disclosed, hedge funds Melvin Capital, Citron and Maplelane LLC are known to be among those who have taken huge positions betting that GameStop’s stock price would fall.
It also circulated on social media that Robinhood forcibly sold GameStop stock without the account holder’s consent, and the movements provoked a furious scream.
GameStop shares ended the day on Friday at nearly 70 percent as Robinhood eased restrictions on the unlikely market enthusiast’s buying even as the broader market fell, with the Dow dropping 620 points over concerns about the bubble’s ripple effects
GameStop shares were up another 67% on Friday, continuing a dizzying rally
But Robinhood argued that the foreclosures of stock were only linked to stocks bought with borrowed money, or to the execution of stock options, which are contracts to buy or sell stock.
“Claims that Robinhood has proactively sold customer shares outside of our standard margin-related sell-off or option granting procedures are false,” a Robinhood spokesperson told DailyMail.com on Saturday.
Buying shares ‘on margin’ means using money borrowed from the broker, and it is not uncommon for brokers to automatically liquidate such shares if an account falls below the minimum balance. On Robinhood, users need a minimum account balance of $ 2,000 to trade on margin.
Margina stocks could have put even more pressure on Robinhood’s balance sheet, potentially leaving the broker on the hook in the event of a massive collapse in GameStop’s stock price.
During the interview with Yahoo, Tenev was also asked what conversations he has had with lawmakers.
“Look, I think we – everyone at Robinhood runs this business with integrity and, above all, with an eye for our customers, individual investors and their interests,” he began.
‘Of course we are in constant dialogue with our regulators and legislators. And we will continue to do so. And you know, looking forward to talking to someone about this.
‘Because of course I think it’s very technical and there is settlement mechanics involved, as you have seen 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 Friday that it should investigate the matter.
The SEC said it will “scrutinize measures taken by regulated entities that could harm investors or otherwise unnecessarily reduce their ability to trade certain securities.”
On Friday, Robinhood lifted its total ban on buying GameStop stock, but restricted users from collecting just one share unless they already had more.
Those buying limits were extended to 50 different stocks late on Friday, including the blue chip names Starbucks and General Motors, in an apparent act of desperation as the company’s cash reserves were stretched to their limits.
Vaccine makers Moderna and NovaVax were also on the list. A Robinhood spokeswoman declined to confirm to DailyMail.com that the same stock would be restricted on Monday, saying only that the company would “ continue to monitor the situation and make adjustments as needed. ”
The restrictions stretched far beyond the “ meme stocks ” like GameStop that attracted frenzied interest this week, and hint at the precarious financial position Robinhood could be in.
Robinhood emphasizes that the restrictions are only temporary. “Our goal is to enable purchases across all securities on our platform,” the company said.
“This is a dynamic, volatile market and we have and will continue to take steps to ensure that we meet our requirements as a broker so that we can continue to serve our clients in the long term,” added Robinhood.
Robinhood wasn’t the only trading platform to implement trading restrictions. TD Ameritrade also had restrictions on buying stock in 19 companies, most of which had strongly shorted stocks.