Yesterday, Robinhood CEO Vlad Tenev finally faced the scrutiny of Washington, D.C. over his company’s role in the GameStop hysteria of last month. Tenev and his bad haircut sat for hours of questioning from representatives on both sides of the aisle. The leaders of major hedge funds were also there, as was one of the more iconic of the GameStop Reddit traders, Keith Gill.
Tenev was forced to answer questions about his company’s questionable behavior during the short squeeze on GameStop.
And one key piece of information emerged that had been a well-kept secret before.
Tenev admitted that Robinhood makes half of its money from big hedge funds like Citadel and Melvin Capital.
Essentially, Robinhood participates in a form of legal money laundering.
They take the money from everyday investors, but then they send those actual trades to the hedge funds and Wall Street insiders.
In exchange, those hedge funds pay them big money.
So instead of living up to their name, Robinhood is secretly redirecting money from everyday investors to line the pockets of the 1 percent.
But of course, Washington won’t do anything for the little guy.
Barstool founder and CEO Dave Portnoy sounded off on Twitter about this yesterday:
— Dave Portnoy (@stoolpresidente) February 18, 2021
Portnoy is right.
Washington will change the rules to protect Melvin and Citadel.
But they couldn’t care less about protecting you, or about a company that blocked its investors from trading during an unprecedented spike in trading interest.
So while a lot of Washington politicians got their jollies this week trying to look like the good guy by grilling Tenev, we’re not going to see anything come of it.
Don’t forget: Washington isn’t your ally in the financial war.