FOX Business, Kristina Partsinevelos, outlines what’s happening to the brokerage app Robinhood and how users have reacted to the company trading this week.
Robinhood CEO Vlad Tenev denied on Friday that pressure from Wall Street hedge funds had led the mobile brokerage firm to trade in which GameStop shares were involved, as prices rose this week.
Robinhood has come under unprecedented scrutiny among critics over the past few days, including congressional lawmakers and Barstool Sports founder Dave Portnoy. In an interview with Yahoo Finance, Tenez referred to the allegations as a ‘conspiracy theory’.
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“I think I kept saying it was not true,” Tenev said. ‘Our decision to temporarily restrict customers from buying certain securities had nothing to do with a market maker or a market participant or anyone else as that put pressure on us or asked us to do so. According to the regulation, it was all about the market dynamics and the requirement of deposit deposits. ‘
Robinhood has come under fire this week after temporarily applying purchase limits to several shares listed on Reddit’s “WallStreetBets” forum, including GameStop, AMC Entertainment and Nokia. The day trading app resumed accepting purchases on Friday, but from the end of trading a limit of just one share per user has been set.
GameStop was one of the shortest stocks on Wall Street before the sudden interest raised the stock price. The trade frenzy has caused a ‘short press’, costing hedge funds investing billions of dollars against the stock.
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Lawmakers on both sides of the political aisle, including Representative Alexandria Ocasio-Cortez, D-NY, and Senator Ted Cruz, R-Tx., Called for an investigation into Robinhood’s decision. In a blog post, the platform said the restrictions are meant to reduce risks.
“I think if you look at this whole situation, it’s a new situation,” Tenev added in the interview. A relatively small number of stocks have gone viral on the internet. And as things go viral on social media and on the internet, there is an exponential growth in interest. And therefore we must be wise. And we need to have prudent risk management. And that’s what the firm did. ”