The crypto-friendly platform Robinhood paused trading of GameStop shares and several other assets to protect the service and its customers. This was stated by Vlad Tenev, co-founder of the platform, according to TechCrunch.
A Robinhood spokesperson joined the discussion with Tesla and SpaceX founder Elon Musk on the media platform Clubhouse. Musk asked Tenev to clarify the reasons behind Robinhood’s trading restrictions.
According to the platform’s co-founder, on January 27 the system faced an “unprecedented load” amid the GameStop stock pump.
On January 28, Robinhood received a $3 billion deposit request from the National Securities Clearing Corporation (NSCC). It exceeded the $2 billion in investments the service had raised since 2013.
According to Tenev, the request was justified: given high market activity, the system needed to account for additional risks.
The amount was reduced to $1.4 billion, and later the NSCC again revised the sum and cut it to $700 million. However, before that, the Robinhood team had to flag volatile stocks and disable their purchases.
“We had no choice, we had to meet the capital requirements. And so the team did everything possible to keep the service available to all customers,” said Tenev.
On February 1, Robinhood kept the limits for the shares of GameStop Corp., AMC Entertainment Holdings Inc., BlackBerry Ltd., Express Inc., Genius Brands International Inc., Koss Corp., Naked Brand Group Ltd. and Nokia Oyj.
In addition, in the conversation with Musk, the platform’s co-founder denied that the market maker Citadel pressured Robinhood to halt trading in the stocks.
Update: Robinhood said it had raised $3.4 billion in four days. The funds will help the service scale to meet unprecedented demand, the company said.
The round was led by Ribbit Capital. Investors included ICONIQ Capital, Andreessen Horowitz, Sequoia and Index Ventures.
We’ve raised $3.4 billion to invest in record customer growth. With this funding, we’ll build and enhance our products that give more people access to the financial system. https://t.co/4gcfY5PCBa
— Robinhood (@RobinhoodApp) February 1, 2021
According to CNBC, as a result of the GameStop rally, hedge fund Melvin Capital lost 53% of capital in January. The cumulative losses for short-sellers on GME in the past month were estimated at $19.75 billion.
On February 1, the price of GME fell by more than 20% to around $250. Yet this remains well above the December price against which shorts had bet.
On January 28 a group of investors filed a class-action suit against Robinhood, accusing it of deliberate and conscious deprivation of private traders’ ability to invest.
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