Execs from Robinhood, Melvin Capital, and Citadel are reportedly expected to testify at a House hearing on GameStop and short sellers

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Vlad Tenev, co-founder and co-CEO of investing app Robinhood.
Vlad Tenev, co-founder and co-CEO of investing app Robinhood. REUTERS/Brendan McDermid

  • The House Financial Services Committee is holding a hearing on the GameStop saga on February 18.

  • Executives from Robinhood, Melvin Capital, and Citadel are expected to testify, Reuters reported.

  • Wall Street came under fire for after Robinhood temporarily restricted purchases of some stocks, including GameStop.

  • Visit Business Insider's homepage for more stories.

Executives from brokerage app Robinhood, hedge fund Citadel, and investment management firm Melvin Capital are reportedly expected to testify as part of a House hearing on Wall Street's role in the GameStop saga.

The executives are expected to testify before the House Financial Services Committee (FSC) on February 18, sources close to the matter told Reuters.

Politico had previously reported that Robinhood CEO Vlad Tenev is expected to testify at the hearing.

Congresswoman Maxine Waters, who chairs the FSC, publicly announced the hearing "Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide" in January.

The committee didn't respond to Reuters' request for comment, and hasn't yet published a full witness list for the hearing, but Waters told Bloomberg she wanted representatives from Reddit, Robinhood, GameStop, Citadel, and Melvin Capital to attend.

"I have my wish list but it's not finalized yet," she said. "I'm trying to get everybody that, you know, has a role to play."

The FSC's February 18 hearing will focus on short selling, online trading platforms, and gamification, and the impact they have on capital markets and retail investors. Lawmakers including Rep. Alexandria Ocasio-Cortez had called on the FSC to hold a hearing, and investigate if necessary.

Day traders banded together on Reddit to bump up the prices of several stocks, most notably GameStop but also AMC, BlackBerry, and Nokia, after noticing that hedge funds were betting against them. GameStop stock has gained massively in recent weeks - from below $5 late last year to a peak of more than $450 a share on January 28.

As a result, some of Wall Street's prominent hedge funds, including Citadel and Melvin Capital, were forced to close their bearish bets against the company, with hefty losses.

Robinhood responded by restricting purchases in highly volatile stocks on January 28, causing GameStop stock to drop. The online brokerage has come under fire for its decision, with both politicians and Reddit users saying it disadvantaged individual investors.

The Robinhood app was bombarded with negative reviews on the Google Play store and was criticized by Ocasio-Cortez, Republican Sen. Ted Cruz, and Tesla's CEO Elon Musk.

Tenev told Musk that Robinhood had been forced to temporarily stop users from buying those stocks because the surge had resulted in a deposit requirement of $3 billion from the National Securities Clearing Corporation. This echoed an email Robinhood sent to members, which said: "We didn't want to stop people from buying stocks and we certainly weren't trying to help hedge funds."

Read more: How hedge funds are tracking Reddit posts to protect their portfolios after the Wall Street Bets crowd helped tank Melvin Capital's short positions

"We must deal with the hedge funds whose unethical conduct directly led to the recent market volatility and we must examine the market in general and how it has been manipulated by hedge funds and their financial partners to benefit themselves while others pay the price," Waters said.

"Hedge funds have a long history of predatory conduct and that conduct is entirely indefensible," she added, calling out private funds who engage in "vulture strategies that hurt workers."

Insider has contacted Robinhood and the FSC for comment.

Democratic Sen. Sherrod Brown of Ohio, the incoming chairman of the Senate Banking and Housing Committee, has also said he will hold a hearing into the GameStop saga.

The US Securities and Exchange Commission (SEC) has also come under scrutiny during the GameStop trading frenzy. Sen. Elizabeth Warren, a longtime critic of Wall Street, told CNN the saga showed the SEC needs to "grow a backbone" and regulate hedge funds.

Netflix and MGM are both reportedly making movies about the saga.

Read the original article on Business Insider

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