Representative Paul Gosar has called the Department of Justice to investigate Robinhood and their relationship with the hedge fund Citadel.
Robinhood, one of the most popular free trading apps in America, stopped ordinary investors from being able to buy shares in GameStop, after users from the subreddit r/WallStreetBets and others engaged in a short squeeze of the stocks, costing hedgefunds billions of dollars as a result. Many other trading apps and exchanges also stopped the buying of the “memestock” shares, and delisted them from their platforms.
In a statement, Robinhood claimed that they had to shut down the buy orders on GameStop and other “meme stocks” because of the “the recent volatility” in the market. “We’re committed to helping our customers navigate this uncertainty,” the firm said.
However, accusations began flying that Robinhood was not doing this for the good of their customers, but for the good of Wall Street, with some highlighting that Robinhood’s “primary revenue stream” last year was from selling orders to hedgefunds like Citadel Securities. Citadel bailed out Melvin Capital, the hedgefund that took the biggest hit from their attempt to short GameStop.
In a letter to the Department of Justice, Representative Paul Gosar said that he was “greatly troubled with the events that have unfolded on Wall Street,” and is demanding action from them. Robinhood’s “unilateral move” to stop the buying of GameStop shares “was done so in a concerted effort to de-platform and silence individual investors,” he argued.
Gosar also drew the link between Melvin Capital, Citadel, and Robinhood, highlighting an article from Bloomberg that noted roughly 40% of Robinhood’s revenue was down to Citadel and other big Wall Street hedgefunds.
“Knowing the involvement Citadel has with Robinhood, it is clear that the actions taken today were motivated by anti-competitive reasons not for concerns of volatility claimed by Robinhood,” Gosar argued. “Because of this blatant conflict of interest and obvious monopolistic activity, I am calling on an immediate investigation by the US Department of Justice into Robinhood and the hedge fund of Citadel LLC.”
My letter to DOJ to open an investigation regarding #GameStop #RobinhoodApp and anti competitive actions between Big Tech and Wallstreet. #wallstreetbets https://t.co/5B9eTcLLSq pic.twitter.com/SO79vyZYCp
— Paul Gosar (@DrPaulGosar) January 28, 2021
The arguments in Gosar’s statement mirror that of a class action lawsuit that was filed against Robinhood in the Southern District of New York, claiming that they stopped the buying of shares in it and other memestocks “in order to slow the growth of GME… [and was] done purposefully and knowingly to manipulate the market for the benefit of people and financial institutions who were not [their] customers.”
Gosar is not the only member of Congress to attack Robinhood, Citadel, and Wall Street. Representatives Alexandria Ocasio-Cortez and Rashida Tlaib, of the Democrat “Squad,” and Republican Senators Ted Cruz and Pat Toomey had also joined in, with Toomey, tipped to be the top Republican on the Senate Banking Committee, describing the situation as “disturbing.”
National File reported that incoming Senate Banking Chairman, Sherrod Brown, will be holding a hearing on “the current state of the stock market,” but has not released a date as to when this would be. “People on Wall Street only care about the rules when they’re the ones getting hurt. American workers have known for years the Wall Street system is broken – they’ve been paying the price,” Brown said in a statment.