The Citadel Link: what Ken Griffin has to do with GameStop

Photographer: David Paul Morris / David Paul Morris

The name is synonymous with power on Wall Street. But suddenly he was there too, in the White House briefing room: “Citadel”.

In light of the wild stock market spectacle involving GameStop Corp., the question last week for the new press secretary was: would Janet Yellen, now Treasury Secretary, recuse herself given the hundreds of thousands of dollars that she had collected while speaking Citadel fees?

To people outside of financial circles, the answer – Yellen is a pro, nothing to do here – was probably less surprising than the fact that Citadel appeared at all. But in the history of GameStop and Robinhood, is it-for-true, Citadel, the financial empire ruled by billionaire Kenneth Griffin, has become a subject of fascination, speculation and, in some corners of the Internet, of budding conspiracy theories.

No one in a position of authority has officially accused Citadel of wrongdoing. But from Washington to Silicon Valley to Wall Street and cyberspace, the giant financial firm is at the center of many of the questions being raised, including the big one: What is happening on Earth?

Griffin, 52, started out in his dormitory at Harvard, and three decades later he runs one of the largest hedge funds and one of the largest market makers in the world. On the verge of extinction during the 2008 financial crisis, the billionaire has now become the ultimate example of a wealthy Wall Street archetype that is easy to rage against.

Step into the angry retail crowd with their “over the moon” bets on GameStop, AMC Entertainment and other actions. When Robinhood imposed trade restrictions on many of these companies last week, Redditors and politicians cried foul. The accusing finger pointed at Griffin, a Republican mega-donor, for intriguing to stamp out individual investor rebellion – even as Citadel and the online broker have both denied the billionaire’s involvement in the decision.

All the roads of last week’s saga seemed to go through Citadel. The market maker, Citadel Securities, is one of Robinhood’s main revenue streams as they pay the trading app at no cost to process their orders and fulfill more than any other company.

Meanwhile, the hedge fund – an entity separate from the market maker – along with Griffin and his partners together invested $ 2 billion in Melvin Capital, which fell 53% in January after being bloodied by short squeeze on stocks. , including GameStop.

“Categorically false”

No one could say why they were sure of Griffin’s part in Robinhood’s decisions and they overlooked the most likely explanation: the brokerage’s financial frailty. The deposits Robinhood had to make for the stocks increased tenfold during the week.

Read more: Robinhood’s Meteoric rise Feels the attraction of Wall Street physics

Congressman Rohit Khanna, a Democrat from California, called on Robinhood CEO Vladimir Tenev to answer questions about whether he had discussed the company’s actions with someone from Citadel, and whether clearing houses restricted trade in coordination with hedge funds.

“There are people who say that we have been forced to do this by the market makers that we serve or by other market players, and I just want to say that this is categorically wrong,” Tenev said in an interview on Bloomberg TV. He later reiterated that no market maker or other player has even asked him to restrict purchases in GameStop or a handful of other high-volume names.

Texas Attorney General Ken Paxton has launched his own investigation into Citadel, Robinhood, and other brokers: “The Apparent Coordination Between Hedge Funds, Trading Venues, and Web Servers to End Threats on their dominance in the market is incredibly unprecedented and false. It stinks of corruption, ”he said.

Paxton is himself the subject of a corruption probe into a separate case, according to the AP, in which he has denied wrongdoing.

Citadel even denies the suspicion of any suspicious behavior. “Citadel Securities has not ordered or otherwise caused any brokerage firm to stop, suspend or limit trading or otherwise refuse to do business,” the company said in a statement. For its hedge fund, “Citadel is not involved in or responsible for a retail broker’s decision to stop trading in any way.”

Market making