The boss of Robinhood has apologised in front of a congressional hearing for the stock-trading app’s behaviour amidst the GameStop chaos.
Co-founder and CEO of Robinhood Vlad Tenev was called to testify before the US Congress after action’s by the WealtTech unicorn prevented people to trade freely with GameStop and other stocks in January and the beginning of February.
He said that the actions, which caused an outrage among both its users and among the public, was “unacceptable to us”, according to the BBC.
“We are doing everything we can to make sure this won’t happen again,” he said.
In the aftermath of the company putting the breaks on trading, lawmakers as politically opposed as republican Ted Cruz and Alexandria Ocasio-Cortez called for a hearing into Robinhood’s actions.
?This is unacceptable,” Ocasio-Cortez tweeted at the time.
Speaking at the hearing, Democratic congresswoman Maxine Waters, who heads the House Financial Services Committee, said, “Many Americans feel that the system is stacked against them and no matter what, Wall Street always wins.”
Tenev said that while he regretted the actions to limit trading for its users, Robinhood had been forced to do so in order to live up to the financial requirements it faced because of the surge in trading.
He said that the $3.4bn it raised at the beginning of the year as it dealt with the would help it avoid similar events from occurring in the future. Robinhood removed the restrictions following those investments.
“I’m sorry for what happened. I apologise,” he said. “I’m not going to say that Robinhood did everything perfectly, and that we haven’t made mistakes in the past, but what I commit to is that we improve from this.”
The boom and bust around GameStop begun on the subreddit WallStreetBets where amateur investors decided to bet against established investors on Wall Street.
Hedge funds and other investors had previously bet that GameStop would collapse as it had been struggling partly due to the pandemic reducing footfall to the video game retailer’s stores.
The redditors predicted that those incumbents were wrong and started to bet against Wall Street, causing a surge in the price of GameStop shares as well as in companies like AMC and BlackBerry.
One of the hedge funds that lost out on the chaos was Melvin Capital. Its chief investment officer and founder Gabriel Plotkin told lawmakers during the hearing that that he was wary of holding short positions again after the actions of the redditors.
“They exploited an opportunity around short selling and we will have to adapt and the whole industry will have to adapt,” Plotkin said.
The GameStop affair has encouraged some to call for stricter regulations, something Republican lawmakers were reluctant to do, arguing that it was regulatory requirements that precipitated Robinhood to reduce the trade.
“I didn’t hear anyone here say they were ready to pile on regulations,” Waters said, adding that she was not rushing any additional actions.
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