Reddit’s merry band of retail traders now have something they have longed for almost as much the “mother of all short squeezes”: Ken Griffin’s attention.
In an uncharacteristic move, the billionaire founder of the hedge-fund firm Citadel LLC and electronic-trading firm Citadel Securities, has fired back publicly at meme-stock traders after they made #KenGriffinLied a trending topic on social media. The hashtag is in reference to allegations from retail investors that Griffin lied to Congress about his role in Robinhood’s HOOD, -2.43% decision earlier this year to halt trading of meme stocks such as GameStop Corp. GME, -0.26% and AMC Entertainment Holdings AMC, +7.09% at the height of January’s short squeeze.
A revised federal filing from Florida’s Southern District submitted on behalf of individual investors uses internal Robinhood communications to make the case that “Citadel [Securities] applied pressure on Robinhood” to freeze trading in the meme stocks in the hours leading up to the trading app’s decision to do so on Jan. 28.
Both Citadel Securities and Robinhood have categorically denied the allegations and did so again on Wednesday.
Griffin and Robinhood chief Vlad Tenev even did so at a Feb. 18 hearing on Capitol Hill, but individual investors who have believed that Griffin and Tenev are in cahoots have seized on the new document as pointing to collusion between the two.
Late Tuesday afternoon, Griffin and his team at market maker Citadel Securities — not to be confused with his hedge fund — had clearly had enough of the online chatter.
After a strongly worded tweetstorm from the firm’s rarely used Twitter account on Monday — the company’s first tweet since January — Griffin released a statement to the media in which the usually press-averse investor struck a tone that his online targets would describe as “throwing shade.”
“It must frustrate the conspiracy theorists to no end that Vlad and I have never texted, called or met each other,” read the statement attributed to Griffin. “But I must say, kudos to Vlad and his team at Robinhood for their remarkable success story.”
Griffin’s response might not just be about the recent hashtaggery.
Since January, Griffin has become a Darth Vader–like figure to the community of retail investors on social media, thanks in part to his unique role at the top of one of the nation’s largest hedge funds as well as, in Citadel Securities, the U.S.’s largest market maker, executing roughly 40% of all stock trades.
On social media, Griffin’s omnipresence in financial dealings by virtue of his companies’ activities has amplified distrust in financial markets and yielded a response to the Wall Street tycoon verging on vitriol. A photo of Griffin wearing a rather blank expression has become a fertile field for memes wherein the powerful financier is often referred to as “Kenny G.”
Citadel Securities pays for the privilege of executing more than half of Robinhood’s trades through so-called payment for order flow, making it essentially the zero-commission platform’s biggest customer.
That relationship has been a source of conspiracy theorizing since January. Citadel LLC’s $2.75 billion investment in Melvin Capital, the hedge fund run by Gabe Plotkin, another executive in the crosshairs of Reddit meme-stock fans, has only added to that perception. Melvin Capital was rocked by its wrongway short bets on GameStop, AMC and other stocks that are classified as being driven by social media rather than fundamentals.
So the virtual ground was viewed by some as fertile for the amended lawsuit filed in Florida on Sept. 21 on behalf of a group of retail investors.
The lawsuit includes communications among Robinhood’s chief operating officer, Gretchen Howard; its chief legal officer, Dan Gallagher; and President Jim Swartwout.
In one chat exchange dated Jan. 27, Swartwout, Robinhood’s president, says “you wouldn’t believe the convo we had with Citadel. total mess.”
Swartwout’s request came after Tenev wrote on Slack: “Maybe this would be a good time for me to chat with Ken [G]riffin,” adding minutes later, “I’ve never met him,” according to the lawsuit.
In February, during a hearing hosted by the House Financial Services Committee, Griffin said his firm “had no role in Robinhood’s decision to limit trading in GameStop or any other of the ‘meme’ stocks,” responding to questions from lawmakers about possible “collusion.”
Griffin replied, “Let me be perfectly clear: absolutely not.”
On Twitter, a post went viral Monday that used video of Griffin’s testimony, interspersing it with screenshots from the new legal filing in an edit meant to cast into doubt the veracity of Griffin’s testimony.
For retail investors, that tweet and a flood of posts like it were enough to get perjury hearings started immediately, but at least one legal expert was throwing cold water on social media’s so-called smoking gun.
“It doesn’t prove perjury, and it’s not necessarily actionable,” said Anthony Michael Sabino, a professor of law at St. John’s University in New York, who reviewed the complaint. “To contend that he lied to Congress on the internet based on this is a stretch.”
Precisely because Citadel Securities is Robinhood’s biggest client, it isn’t shocking to learn that the two communicated in the face of an unprecedented market move while one of the parties found itself in a liquidity drought, the law professor said.
Both parties made it clear to Congress that communication occurred but, once again, steadfastly denied any collusion on limiting user access to GameStop and other meme stocks.
Both did so again on Tuesday, with Tenev mounting a defense of the payment-for-order-flow model in a Wall Street Journal op-ed. And while Tenev didn’t mention Citadel by name, he went out of his way to make a case that his company’s relationships with market makers are a key element in protecting investors and “democratizing finance.”
But the new lawsuit does one key thing: It makes everyone involved look pretty bad to people already inclined to view them that way.
The Reddit crowd will see any lack of investigation into Griffin as yet another example of politicians and regulators protecting Wall Street billionaires, because the mere existence of evidence that Robinhood and Citadel Securities executives chatted in the lead-up to Jan. 28 (regardless of what they might have discussed) will almost certainly be enough to keep the fires of populist rage burning for at least a few more months and keep retail investors out there propping up GameStop and AMC, and hunting for new short-squeeze targets to blow up hedge funds and take the fight to perceived villains like Griffin.
Adding more fuel to that fire is the fact that Griffin’s legion of proud trolls has now provoked a public response from the man they have made into an avatar of everything wrong, in their view, with the American financial system.
In fact, they are already enjoying using the new online “dialogue” as a rallying point to keep the fight alive.
Responses to Citadel’s defensive tweetstorms on Monday and Tuesday have prompted a plethora of subreddit posts and tens of thousands of replies from Twitter users.
“Citadel Securities did not ask Robinhood or any other firm to restrict or limit its trading activity on January 27th,” the account tweeted Monday afternoon.
“This exactly what someone who asked Robinhood to restrict trading would say,” the parody account Litquidity saucily replied.
Citadel’s tweet received just over 1,200 likes. Litquidity’s response received more than double that number.
Citadel’s tweet of Griffin’s statement received 255 retweets, 148 likes and more than 1,500 (mostly negative) comments.
In some online circles, those stats are the Platonic ideal of “getting ratioed.”