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Robinhood Took Fire From Congress

A House committee with more than 50 members held a hearing about GameStop and the meme-stock mania for five hours, featuring six witnesses. In the end, it was all about Robinhood. Vlad Tenev, the chief of the brokerage app, fielded the most questions, which often cast him as the villain of the saga.

“Don’t you see and agree that something very wrong happened here?” David Scott, Democrat of Georgia, asked Mr. Tenev. “And that you are at the center of it?”

What we learned about Robinhood. Mr. Tenev apologized for his company’s failings — without specifying which mistakes were made — but said his company broke no laws and didn’t prioritize Wall Street business partners over retail users. “We don’t answer to hedge funds,” he said.

Lawmakers pressed Mr. Tenev on multiple fronts:

  • After he repeatedly asserted that Robinhood customers had made $35 billion in realized and paper investment gains, Jim Himes, Democrat of Connecticut, pushed him on more specifics, which Mr. Tenev ultimately declined to give. Thus, Robinhood’s total assets under management remain a mystery.

  • When he said that Robinhood had curbed some customer trades because clearinghouses demanded more collateral from his firm, Alexandria Ocasio-Cortez, Democrat of New York, shot back that the brokerage may instead have failed to manage its own capital risks. Anthony Gonzalez, Republican of Ohio, pursued a similar line of attack, making it a bipartisan affair.

  • Several lawmakers criticized the Robinhood app’s so-called “gamification” approach, where trades are celebrated with virtual confetti and made to feel more fun. “You are encouraging your customers to tap 1,000 times a day,” said Ritchie Torres, Democrat of New York. Mr. Tenev responded, “We wanted to give our customers delightful features.”

  • Sean Casten, Democrat of Illinois, accused the company of taking advantage of inexperienced traders, including a customer who died by suicide after believing he had run up huge losses via the Robinhood app. To make his point, he called Robinhood’s automated help line: A message told users to email for support, and then the call ended. Here’s a clip of the hearing’s most noteworthy exchange.

What else happened. Robinhood wasn’t quite the only thing discussed (although it often seemed like it):

  • Ken Griffin faced harsh questions about Citadel Securities’ practice of paying brokers like Robinhood to execute their orders, but was frequently cut off when trying to explain the intricacies of the business. The billionaire stressed that his hedge fund had nothing to do with Robinhood halting trading in GameStop and other stocks.

  • Gabe Plotkin of Melvin Capital said his fund had been short GameStop for years, and the losses it suffered from the rise in the stock last month were big but manageable. Citadel’s investment in his firm during the frenzy was not a bailout, Mr. Plotkin said.

  • Steve Huffman of Reddit said there were no signs of market…

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