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Citadel Securities, whose founder Ken Griffin testified about the episode during a congressional hearing in February, launched a series of tweets on Monday evening, denying claims it pressured Robinhood to restrict trade . Robinhood, headed by chief executive Vlad Tenev, said in an emailed statement Tuesday that the lawsuit paints “a false tale of collusion” with Citadel Securities.
Griffin added his own statement on Tuesday: “It must frustrate endless conspiracy theorists that Vlad and I have never texted, called or met. But I have to say, well done to Vlad and his team at Robinhood for their remarkable achievement.
The plaintiffs in the lawsuit allege that Citadel Securities accumulated a substantial short position in GameStop Corp. and other stocks that exploded in value, and which the market maker pressured Robinhood to prevent clients from buying those stocks, which the online brokerage did on January 28. .
Read more: The Riddles of Explaining the Robinhood Wall Street Guarantee Crisis
Senior executives at Citadel Securities and Robinhood have had “numerous communications between them which indicate that Citadel pressured Robinhood,” according to the September 22 complaint filed in federal court in Miami.
Both companies rebuffed the idea that Citadel Securities ordered the brokerage to restrict buying. Robinhood said he was facing a strong demand for collateral from a central clearing house and rushed to raise more than $ 3 billion in additional capital in the following days.
“We will work vigorously to continue to correct the record with the facts,” Robinhood said in his statement Tuesday. The company’s securities unit “communicated with market makers to ensure continued market access for our clients.”
Citadel Securities also tweeted a rebuttal of a charge that Griffin lied to lawmakers: “When asked if Citadel Securities asked Robinhood to restrict trading, Ken Griffin honestly told Congress:” Allow me to be perfectly clear. Absolutely not.’ “
The saga has drawn attention to the complex machinery behind the execution of transactions. Robinhood sends client orders to Citadel Securities and other trading companies to be executed, and accepts compensation from those companies in what is known as Payment for Order Flow.
While other retail brokerages such as Charles Schwab Corp. also use such deals, this is particularly important to Robinhood, accounting for around three-quarters of its revenue last year and 80% in the first half of 2021, according to the documents filed.
The payment of order flow, which critics say poses potential conflicts of interest, is under renewed scrutiny by Securities and Exchange Commission chairman Gary Gensler, who said ‘a ban was possible. Last week, Scion Asset Management’s Michael Burry said he received a subpoena from the SEC in an investigation into the meme stock madness.
Read more: Michael Burry Says He Received SEC Submission On GameStop
Separately, Tenev defended his company’s business model in a Wall Street Journal editorial on Tuesday. Paying for order flow, he writes, allows the company to offer commission-free, no-account minimum trades, “which has helped a new generation of retail investors get started.”
Banning the practice, he said, “is unlikely to help retail investors get better prices and would likely re-erect barriers that have kept so many people from entering the market.”
Responding to criticism that Robinhood lures inexperienced investors in with gambling tactics to get them to trade more, he wrote: “Investing isn’t a game, but does it have to be dark and hard to understand?
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