The firm received backlash from the public some days ago due to their controversial action. The action would probably cause customers to move towards peer-to-peer decentralized trading platforms since CEX platforms tend to disrupt trading caused by personal reasons or governmental regulations.
Robinhood would have to face some consequences with the holding of its previous plans to go public. The firm’s Chief Executive, Vlad Tenev, might have to face the United States Congress. When the company stopped people from purchasing GameStop tokens, not many understood the rationale behind Robinhood’s sudden plan to cut off GMC trading.
Authorities investigate Robinhood’s action
Many people criticized the company, while others concluded that the company has ulterior motives for the action. Presently, Congress plans to investigate the issues, while the CEO might appear before the Congress’ Financial Service Committee. The subject surrounds the reason behind the firm’s halting of share purchases on GameStop. Around the time, shares were rising in value.
A financial group on Reddit, with a large following, decided to artificially drive up prices by purchasing the same stocks while utilizing Robinhood as the purchase venue. Many firms that made bets that the stock’s value would fall might likely lose a lot of money. People felt Robinhood bailed one of its partners, Citadel, by halting trading because the latter also placed a bet and could have lost millions.
Customers could not buy shares from those companies hedge funds believed would see a fall in value. Robinhood made the share prices fall because interested investors could not purchase shares, driving prices up. People have different opinions concerning their thoughts on the firm’s reason for the unexpected act.
While some said the company wanted to help its customers, others concluded that the business wanted to protect itself from being joined as an accomplice to a Reddit group’s manipulation scheme. Some opined that the company would have suffered if it didn’t lock the trading due to some issues.
Sources claim that Robinhood tried to protect Citadel
The Citadel protection rumor has wider followership, with many believing that the firm tried to prevent Citadel from losing millions through the bet. When asked concerning the protection, the exchange utterly denied the claims while saying that it would be breaching some legal requirements if it had done that to protect Citadel. Amongst the current uproar on social media, this caused the House to ask Tenev to testify concerning the firm’s action.
The Reddit group’s plan is also controversial since it tried to manipulate the market to earn more. The firm’s CEO would face Congress by February 18, as the legislature investigate Robinhood’s relationship with the GameStop shares.
Although Congress has not officially shared the CEO’s summon news, many understand that it would be an intense period for the group. The group’s action caused severe damages to GMC’s stocks, which led to backlashes from some legislature members. The lawmakers assured that there would be a thorough investigation to get to the bottom of things.
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