Robinhood CEO Vladimir Tenev said in testimony before the House Financial Services Committee on Thursday that any allegations his trading app tried to help hedge funds by limiting trades on volatile stocks last month is false.
Tenev began his testimony before the committee at around noon ET on Thursday, by saying that Robinhood sought to “democratize investing” and make it easier for retail investors to gain access to stock markets.
Committee chairwoman Maxine Waters (D-Calif.) asked Tenev to expound on what happened on Jan. 28, the day that Robinhood blocked trading of GameStop stock amid a frenzied trading rally.
Tenev told the panel that the online broker, one of the most popular venues in the recent retail-trading mania, put temporary buying restrictions on GameStop and a number of other securities as clearing house-mandated deposit requirements for equities increased ten-fold.
“Robinhood put the restriction in place in an effort to meet increased regulatory deposit requirements, not to help hedge funds,” Tenev told the panel.
“We don’t answer to hedge funds. We serve the millions of small investors who use our platform every day to invest,” he added.
In prepared remarks ahead of his testimony, Tenev insisted there was no basis to claims that Robinhood imposed the trading caps in order to disadvantage smaller investors.
“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 said in written testimony.
Still, he apologized to Robinhood customers.
“Despite the unprecedented market conditions in January, at the end of the day, what happened is unacceptable to us. To our customers, I apologize, and please know we are doing everything we can to make sure this can’t happen again,” he said.
Tenev said in his testimony that his platform has raised more capital to serve as a buffer against future turbulence like the unusually high, rally-fueled deposit request that was made by clearing houses, which help settle transactions on platforms like his.
“Robinhood immediately secured additional funds—altogether through capital raising and other measures, we’ve increased our liquidity by more than $3 billion, to cushion ourselves against increased collateral requirements and related market stress in the future,” he said.
Besides Tenev, others to face a grilling before the panel include Wall Street hedge fund managers, the chief executive of Reddit, and a YouTube streamer known as Roaring Kitty.
Waters has made it clear hedge funds are in her crosshairs, in January blaming their “unethical conduct” for the volatility.
“Many retail investors appeared motivated by beating Wall Street at its own game,” she said at the hearing opening. “There are many whose beliefs [sic] the system is rigged against them has been enforced.”
In prepared testimony published on Wednesday, the witnesses generally acknowledged the GameStop saga was unprecedented, but they all said there was no foul play on their part.
“Reddit users attempting to take down a hedge fund, that’s an extraordinary thing. … This is a break from history,” Representative Patrick McHenry, the senior Republican on the House panel, told reporters before the hearing. “Congress has to do a lot more work to understand the nature of what occurred.”
The Reddit rally drove massive volatility in GameStop and other shares, prompting clearing houses to call for billions of dollars in extra collateral from Robinhood and other retail trading platforms.
Besides Robinhood, other platforms also suspended buying in the affected stocks on Jan. 28.
Lawmakers from both parties were outraged and questioned if the trading platforms were siding with hedge funds over small retail investors.
Reuters contributed to this report.