The head of the hedge fund in the middle of last month’s GameStop frenzy says Redditors are attacking him with anti-Semitic insults and text messages.
Melvin Capital founder Gabe Plotkin made the troubling claim in a prepared testimony he plans to deliver at Thursday’s House Financial Services Committee hearing on the recent populist revolution in the stock market.
Melvin became a prime target of budding traders on Reddit’s WallStreetBets forum for taking a short position in GameStop, meaning it was betting the struggling video game retailer’s stock price would fall.
While Reddit users encouraged each other to “act in the opposite direction” of Melvin’s investments, they also personally targeted Plotkin, he said.
“Many of these posts were laced with anti-Semitic libel against me and others,” Plotkin said in his testimony. “The posts said things like ‘It’s very clear we need a second holocaust, the Jews can’t get away with this.’ Others sent me similar profane and racist text messages.”
WallStreetBets has a reputation for being mean and rude. Users often refer to each other as “retards” – an insulting slur for people with intellectual disabilities – and Keith Gill, the Redditor who led the GameStop rally, mentions “DeepF-ingValue” in the forum.
But Reddit CEO Steve Huffman defended WallStreetBets in his prepared testimony, saying the bulletin board with 9.1 million members is an online community of “considerable depth.”
“WallStreetBets may look sophomoric or chaotic on the outside, but the fact that we are here today means that they have managed to raise important issues about fairness and opportunity in our financial system,” said Huffman.
Plotkin’s testimony also highlighted how GameStop’s unprecedented stock price surge affected him both professionally and personally.
Melvin Capital – who named Plotkin after his grandfather – closed its short GameStop position with a loss in the last week of January as the company’s stock price rose to a peak of $ 483 per share.
Melvin held that position since it was founded six years ago, because the fund believed GameStop’s business model of selling video games in brick-and-mortar stores “was being overtaken by digital downloads over the Internet,” Plotkin said.
Melvin dropped the bet “not because our investment thesis had changed, but because something unprecedented was happening,” Plotkin said. “We also reduced many other Melvin positions with significant losses – both long and short – that were the subject of similar posts.”
Despite the turmoil, Plotkin insisted that the $ 2.75 billion investment Melvin received from Ken Griffin’s Citadel and Steve Cohen’s Point72 at the end of January was not intended to save the fund as it was struggling with heavy losses.
“Sure, Melvin had been going through a rough time, but we always had a margin break and we weren’t looking for a cash injection,” he said.