The son of Bulgarian immigrants, he founded the service under the influence of the ‘Occupy Wall Street’ movement. At the age of 28 he entered the Forbes ’30 under 30 ‘list.
This week, online brokerage app Robinhood was in the spotlight regarding the ‘flash mob’ of Reddit users, who raised the stock price of retailer GameStop to hurt hedge funds.
Last Thursday, Robinhood blocked the purchase of the securities. That move caused it to plummet from the highest $ 483 to $ 132. Although they later stood up again, the decision received strong criticism, including allegations of collusion with hedge funds. Central to the scandal was the company’s CEO, Vlad Tenev, who had to explain the company’s position.
Born in the port of Varna, in western Bulgaria, Tenev emigrated with his parents, World Bank employees, to the US when he was 4 years old, according to the Bulgarian portal Ambicia. There he graduated from Stanford University, where he met and befriended Baiju Bhatt, an American of Indian descent.
In 2010, the two founded their first company, Celeris, dedicated to algorithmic trading in the stock market. They later left and founded the computer company Chronos Investment, which partnered with major investment banks.
Answer from ‘Occupy Wall Street’
It was then that the two friends, who lived in New York, came up with a tool that would allow ordinary people to invest in securities with ease. It was fueled in large part by ‘Occupy Wall Street’ protests against the economic power of the richest 1%, Fox News reports. They founded Robinhood in 2013. Unlike other brokers, the app had two crucial functions – no commissions and no minimum balance.
Instead, the application earns payments for the order flow, that is, it receives money from major trading companies, positioning themselves as market makers. They, in turn, account for the ‘spread’ or difference between the purchase price and the sale price of the operations, Investopedia explains. Another source of income is the Robinhood Gold membership, which provides the user with several specific business tools.
Thanks to these innovations, the company managed to attract more than 70 investors and grew enormously. As early as 2018, it was estimated to be around $ 6 billion. Four years after opening, it already had four million customers. They were mostly millennials, aged between 28 and 41 years old.
About then Bhatt and Tenev became billionaires, Bloomberg said. In 2016, when Tenev was 28, he was listed on Forbes Magazine’s ’30 under 30 ‘Promising Young Entrepreneurs list. Also in 2018, along with Bhatt, it occupied the 24th position on Fortune’s ’40 under 40 ‘analogue list.
Robinhood in the middle of the scandal
- Robinhood blocked the purchase of the GameStop titles on Thursday when they hit an all-time high of $ 483
- According to reports, the application raised more than $ 1 billion in emergency funds on Thursday to continue to operate amid market volatility
- In response, small investors presented a class action lawsuit against the app and received over 100,000 negative reviews within an hour
- People like US Congressman Alexandria Ocasio-Cortez and billionaire Elon Musk criticized the platform. There were also allegations that Robinhood was trading under pressure from hedge funds
- Robinhood lifted the ban on buying GameStop stock, however limited the number of titles that can be traded at a single share for retail customers
- On Friday, Tenev denied that it had deactivated the purchase of GameStop shares under pressure from hedge funds. “It was all about the market dynamics and the requirements for clearinghouse deposits, according to the regulations,” he said.