Court Filings Spark New Citadel-Robinhood GameStop Theories

Internal Robinhood messages reveal Robinhood executives scrambled to talk to Citadel CEO Ken Griffin, breathing life again into theories that the two firms colluded to suppress Gamestop's stock price.
Court Filings Spark New Citadel-Robinhood GameStop Theories

On Monday night, Citadel Securities broke its months-long silence on Twitter to address rumors circulating on social media that chief executive Ken Griffin lied to Congress about his actions leading up to the temporary halting of GameStop trades on Robinhood late January.

The GameStop investment craze was largely characterized by retail investors imagining that they are harming hedge funds and short sellers. For months, countless theories and accusations have insisted that Citadel was behind Robinhood’s decision to halt trading on the 28th after other brokerages had halted trading earlier that week. The central thrust of the theory rests on two relationships: that Robinhood received over 35 percent of its revenue last year ($39 million) from Citadel Securities, which pays the app for a feed of its user’s trades before they’re executed, and Citadel helped bail out GameStop short seller Melvin Capital when it started feeling the squeeze.

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Robinhood and Citadel have denied this theory, including under oath at Congressional hearings. 

The most recent round of rumors trace back to a document filed as part of a class action lawsuit against brokerages including Robinhood and market makers including Citadel Securities, in the United States District Court of the Southern District of Florida on September 22. The complaint details conversations within Robinhood on January 27th, one of the days trading of Gamestop was halted by various brokerages, as well as conversations between Robinhood and Citadel Securities.

The lawsuit alleges that on January 27, “high level employees of Citadel Securities and Robinhood had numerous communications with each other that indicate that Citadel applied pressure on Robinhood.” Robinhood COO Gretchen Howard allegedly told CEO Vlad Tenev in Slack that she and other Robinhood executives including Jim Swartwout were getting on a call at 5PM with Citadel Securities. 

Later that same day, Robinhood Securities President and chief operating officer Jim Swartwoth said in an internal chat, "you wouldn't believe the convo we had with Citadel, total mess." 

Later that night, the lawsuit alleges that a call was set up between Tenev and a redacted person at Citadel Securities. The lawsuit notes that Swartwout later stated, “I have to say I am beyond disappointed in how this went down. It’s difficult to have a partnership when these kind of things go down this way.” 

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The allegations coalesced in a hashtag aimed at Citadel CEO Ken Griffin: #KenGriffinLied, which gained steam Monday afternoon, when Citadel Securities insisted it "did not ask" Robinhood or any firm to restrict or limit trading activity on January 27th. 

Citadel Securities went on to claim it was "the only major market maker during this time that provided continuous liquidity every minute of every trading day." Another tweet adds that Ken Griffin and Vlad Tenev "have NEVER met or spoken.” The firm also tweeted a video clip of Griffin telling Congress that he did not instruct Robinhood to restrict trading, adding that he said so “truthfully.”

At two points in the lawsuit, it mentions that Tenev allegedly requested to speak with Griffin, precisely because the two had never met, “not specific to this crazy issue.” The lawsuit does not say that this meeting materialized. In any case, Citadel Securities’s tweets and this lawsuit document have given new life to a round of conspiracy theories that have popped up here and there over the last few months. It’s worth noting that Robinhood disclosed in its S-1 filing for an Initial Public Offering that it is currently being investigated by state, local, and federal regulators for its role in the GameStop mess and for halting trading. 

Still, that hasn't stopped people from speculating and Citron’s return to twitter only fanned the flames. A quick glance at #KenGriffinLied and another hashtag it spawned( #KenGriffintoJail) reveals as much. 

The top result reminds readers of 2015, the year Citadel Securities received its market maker status and the same year the Shanghai Stock Market banned the company for trading for four years over "malicious short selling.” Others took to mocking Griffin, calling for his imprisonment, callbacks to his testimony, and celebrating the leaks and trending topics.