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Citadel Didn’t Just Bail Out a GameStop Short Seller; Citadel Also Had a Big Short Position in GameStop

Courtesy of Pam Martens

Ken Griffin, Founder, CEO and Majority Owner of Citadel

Ken Griffin, Founder, CEO and Majority Owner of Citadel

Politico reported yesterday that the House Financial Services Committee plans to call Vlad Tenev to testify on February 18. That’s the CEO of the online trading app known as Robinhood that has played a role in the controversy surrounding the bull raid (now turned bear raid) in the shares of GameStop. If that’s to be the only witness, you might as well call Ken Griffin’s personal shopper to testify.

Griffin is the billionaire founder, CEO and majority owner of Citadel, which has been operating in the GameStop saga like a maestro from an orchestra pit. (For our previous profile of Griffin and Citadel, see here.)

As Melvin Capital, a major short seller in the shares of GameStop was about to collapse as the stock soared, Griffin and Citadel’s hedge fund rode to the rescue, injecting $2 billion in cash into Melvin to save its hide. The first question for the House Financial Services Committee is exactly what was the motivation for Griffin to prop up a competing hedge fund.

Then there is the fact that as all of those millennials and Gen-Zers at Reddit’s WallStreetBets message board were strategizing on their bull raid against the short sellers, Griffin’s Citadel Execution Services had a telescopic view of what was happening because Citadel Execution Services executes a big chunk of both stock and option trades for Robinhood. That unit of Citadel can see both the direction and the dollar volume of money heading to push a stock up or down. And, it gets to see all of that before it executes the trades, raising speculation that it might be tempted to front-run these trades for its own account.

This is known as payment-for-order-flow and it’s probably not a comforting thought that this is what Bernie Madoff’s broker-dealer was doing while Bernie was running the largest Ponzi scheme in history.

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