In prepared testimony released Wednesday, Robinhood CEO Vlad Tenev categorically denied helping hedge funds that had shorted GameStop stock, an accusation levied at the CEO by many angry clients after Robinhood disabled buying of the stock on Jan. 28.
“Any allegation that Robinhood acted to help hedge funds or other special interests to the detriment of our customers is absolutely false and market-distorting rhetoric,” Tenev wrote in his prepared testimony. “Our customers are our top priority, particularly the millions of small investors who use our platform every day to invest for their future.”
Tenev has been vocal since the temporary halting of buying of GameStop and other stocks — which were resumed soon after — explaining that market plumbing mechanics were behind the stop, not any conspiracy to side with hedge funds over investors. (Hedge funds also made a lot of money on the GameStop trade.)
In his testimony, Tenev called the GameStop situation “extraordinary” and that the limits were “necessary to allow us to continue to meet the clearinghouse deposit requirements that we pay to support customers trading on our platform.”
“We have since taken steps to raise $3.4 billion in additional capital to allow our customers to resume normal trading across Robinhood’s platform, including trading in the stocks we restricted on January 28th,” he said.
Tenev’s statement includes backstory about the company and his own beginnings in Bulgaria and the company's stated mission to "democratize finance.” The testimony walks the line between a story of empowering those who are shut out of the market and that of a free market solution, which may appeal to both sides of the aisle.
The CEO also addresses the freedom to make bad investments, by pointing out that Robinhood does not sell investment advice but is merely a brokerage.
“Robinhood is not an investment adviser and does not make investment recommendations,” his testimony says. “But we are committed to providing quality educational resources to our customers and the general public about the investment opportunities available to them. That is why Robinhood Financial offers a library of free, digestible articles about investing on the Learn website, which is available to the general public.”
Tenev provides another snapshot of the business, noting that the company has over 13 million users, with a median customer account size of around $240 and average size of about $5,000.
“Most customers appear to be investing in listed stocks and ETFs for the long-term,” the testimony reads. “What we see is generally not consistent with popular memes suggesting that most of our brokerage customers are unsophisticated day traders taking inordinate risks with large sums of money on complex financial products.”
Tenev preemptively defended the company's business model that relies on payment for order flow as market-making companies like Citadel Securities pay Robinhood for the right to execute trades.
Prices for clients, Tenev added, are usually better than prices on exchanges, and said that the company had gotten more than $1 billion worth of better prices for clients.
After Tenev reads his statement, the committee will likely ask questions about the situation, the company’s business model, and relationships.