The man known as "Roaring Kitty," the YouTube personality who helped spark last month's frenzy over GameStop stock, was buttoned down for Thursday's congressional hearing into the unprecedented market rally.
But behind him, 34-year-old Keith Gill had a motivational poster with a cat dangling by one arm and the words: "Hang in there." A red headband that became a trademark of his YouTube videos also rested in the background.
The Massachusetts ex-financial educator, who found himself at the center of the GameStop controversy because of his videos and Reddit posts cheerleading the video-game stock, told lawmakers he always believed in the struggling company and didn't push anyone to buy or sell shares for his own profit.
"It is true that my investment in that company multiplied in value many times. For that, I feel enormously fortunate. I also believe the current price of the shares demonstrates that I have been right about the company," said Gill, who is a registered securities broker and posted on Reddit under the username "DeepFucking Value."
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"A few things I am not-I am not a cat," he continued, likely in homage to the lawyer who went viral over an accidental feline Zoom filter. "I am not an institutional investor, nor am I a hedge fund. I do not have clients and I do not provide personalized investment advice for fees or commissions. I'm just an individual whose investment in GameStop and posts on social media were based upon my own research and analysis."
As Gill testified, saying he continued to be "bullish" on GameStop, the stock saw another boost and fans took to Twitter to cheer him on. "I plan to name my future son 'Deepfuckingvalue' $GME," one Twitter user crowed.
The hotly-anticipated hearing roped in the heads of Robinhood and Reddit, along with Melvin Capital, which suffered huge losses in the GameStop short squeeze. Congress also grilled the chief of Citadel Securities, which along with partners infused $2.75 billion into Melvin after its short colossally failed. Citadel carries out trades made on Robinhood's app.
At the hearing, Melvin CEO Gabe Plotkin said he was "personally humbled" by his GameStop losses. But he denied reports that his firm was "bailed out" by Citadel, saying, "Citadel proactively reached out to become a new investor, similar to the investments others make in our fund. It was an opportunity for Citadel to 'buy low' and earn returns for its investors if and when our fund's value went up."
Last month, an army of amateur investors emboldened by the Reddit forum r/WallStreetBets upended the stock market by rallying around moribund video-game retailer GameStop (and other companies approaching extinction like BlackBerry and AMC Entertainment). At the time, professional investors were trying to short-sell GameStop, or in other words, they were betting the company would fail.
On Thursday, Reddit CEO Steve Huffman testified his platform analyzed WallStreetBets and found no bots, foreign agents, or other bad actors contributed to the GameStop explosion and said Reddit would cooperate with state and federal regulators.
"I would like to reiterate why it is important to protect online communities like WallStreetBets," Huffman concluded. "WallStreetBets may look sophomoric or chaotic from the outside, but the fact that we are here today means they've managed to raise important issues about fairness and opportunity in our financial system. I'm proud they used Reddit to do so."
This merry band of day traders-many of them millennials armed with memes, rocket emojis, and "eat the rich" sentiment-drove the price of GameStop's stock from $20 to more than $480 per share by goading rookie investors to pour their money into the chain, whose "stonk" had plummeted to $2 per share last summer.
But the small-time investors weren't alone. One New York hedge fund, Senvest Management LLC, made $700 million, while The Big Short hedge-funder Michael Burry reportedly gained $100 million after selling his stake in late 2020.
The massive David vs. Goliath trolling reaped profits for a number of the little guys, in some cases tens of thousands of dollars, while also causing established Wall Street hedge funds to lose billions of dollars. Many of the other novice traders, however, also lost out. The controversy has resulted in the rights to at least five future movies and two TV shows, a Justice Department probe, and an avalanche of class-action lawsuits.
Many of these Reddit investors used the Robinhood investing app, a commission-free platform that has democratized trading and has been accused of "gamification," for allegedly employing playful, game-like features on its app to increase engagement at the expense of inexperienced users, without installing safeguards. A month before the GameStop surge, Massachusetts regulators targeted Robinhood for "gamifying" investments, citing one young customer who made more than 12,700 trades in a six-month period.
In response to the GameStop frenzy, Robinhood put restrictions on trading shares in the company and several others hyped up by r/WallStreetBets. Soon after, lawmakers on both sides took swipes at Robinhood for blocking trades to protect hedge funds, and at least 90 class-action lawsuits have been filed against the app, claiming its restrictions were unfair, unlawful, and caused users to lose millions of dollars.
Robinhood CEO Vlad Tenev-who reportedly went into hiding because of death threats from angry clients-defended the platform on Thursday, testifying that it allows people of all backgrounds to invest and that it doesn't "answer to hedge funds."
He said the unprecedented spike in a handful of stocks, especially on Thursday, Jan. 28, forced Robinhood to "hold the line" and restrict trading because of regulatory requirements.
When users buy or sell stocks, Robinhood routes the orders to market makers and submits the trade to a clearinghouse for settlement. It takes about two days for the clearinghouse-which acts as a middleman between buyers and sellers of securities-to process the transactions.
According to Tenev, the clearinghouse, the National Securities Clearing Corporation, notified Robinhood that it had a deposit deficit of $3 billion, an amount the platform didn't immediately have. Indeed, brokerages like Robinhood are required to make deposits using their own funds to cover potential risks to the clearinghouse until the trade settles.
"To our customers, I'm sorry and I apologize," Tenev said. "We're doing everything we can to make sure this won't happen again."
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Tenev was also in the hot seat over one Robinhood user's suicide. The parents of 20-year-old Alex Kearns, who killed himself last June after mistakenly believing he'd lost $730,000 on the app, recently filed a wrongful death suit against the firm.
One congressman, Rep. Sean Casten-a Democrat from Kearns' home state of Illinois-used part of his questioning time to illustrate the need for a live customer support line for Robinhood users.
"Let's imagine, right now, that we are today's version of Alex Kearns," Casten said, holding up his phone. Robinhood's customer support line was on the other end.
"Thanks for calling Robinhood! Please visit us at Robinhood.com or on our app for support," the canned message played. "If you have an urgent need, please make sure to include details of your order when reaching out."
Casten yielded the remainder of his time.
"I'm sorry to the family of Mr. Kearns for your loss," Tenev said. "The passing of Mr. Kearns was deeply troubling to me and to the entire company, and we have vowed to take a series of steps, very aggressive steps, to make our options products safer for our customers, including changing the customer interface… and adding a live customer support line."
Lawmakers directed most of their ire at Tenev throughout the hearing, which briefly touched on Tesla CEO Elon Musk entering the fray with a tweet that added fuel to GameStop mania. Rep. Steve Stivers (R-OH) asked Plotkin if he believed Musk played a significant role in lifting GameStop stock, and if Musk was targeting him because Melvin Capital had shorted Tesla stock in the past. "That would be pure speculation as to his motives of putting that tweet out," Plotkin answered.
Some elected officials used the hearing to take shots at Wall Street honchos including Citadel CEO Kenneth Griffin.
Rep. Rashida Tlaib (D-MI) said, "To many of my residents, the stock market is simply a casino for the rich whose gambling hurts pension and retirement funds. And when you all screw up, the people end up paying the tab through losses or bailouts." Tlaib then asked Griffin about Citadel's lobbyists opposing a Wall Street transaction tax, before interrupting him to say, "Let's not gaslight the American people. Y'all be fine with the tax."
"That's the reason why we're having this hearing… sometimes you are irresponsible and it's set up in a way that helps only the wealthy and leaves people like my community here with this large income inequality that I feel never gets the bailout it deserves."
Alexandria Ocasio-Cortez (D-NY) zeroed in on Robinhood, telling Tenev that the decisions his company made harmed his customers. She took aim at Robinhood's "payment for order flow" business model, which allows the free app to receive payments from market makers like Citadel for routing trades to them.
"Mr. Tenev, would you be willing to commit today to voluntarily pass on the proceeds from the payment for order flow to Robinhood customers?" Ocasio-Cortez asked.
He answered, in part, "Robinhood is a for-profit business and needs to generate some revenue to pay for the costs of running this business."
Meanwhile, Gill is also facing a class-action suit, which alleges he assumed "the fake persona of an amateur, everyday fellow" and profited by artificially inflating the price of the stock.
Then posting anonymously on Reddit, Gill began updating his fellow r/WallStreetBets investors on his GameStop bet in mid-2019, posting that he had bought $53,000 in the video game retailer's stock.
While his initial post didn't make many waves, on a forum where users often post their exorbitant losses and esoteric stock bets, Gill kept posting his gains-or, as he called them, "YOLO Updates,"-first weekly, then daily. At his peak, on Jan. 27, his account showed a total gain of upwards of $33 million.
Gill ended up losing much of those gains when GameStop stock fell back to earth, but his initial bet made him a legend among the subreddit's 9 million subscribers. On Thursday morning, ahead of his testimony, one of the top posts on the subreddit was "Ode to DeepFuckingValue."
"You certainly have a number of people around the world who appreciate who you are, and I think you are the best of us," the post read. "I could not think of a better representation of the good in this world, let alone this r******* band of apes on Reddit."
In written testimony for the U.S. House Committee on Financial Services, Gill said he was merely an individual investor who posted "my thoughts and analysis about individual stocks and whether they are correctly valued" on social media.
"I did that with GameStop," Gill said in his statement. "I believed the company was dramatically undervalued by the market. The prevailing analysis about GameStop's impending doom was simply wrong."
Gill noted he wasn't the only person publicly banking on Gamestop. "Investors including Chewy co-founder Ryan Cohen, whose purchase of GameStop shares and advocacy with the GameStop board helped positively affect the share price in late 2020, publicly expressed similar views," he continued.
"Hedge funds and other Wall Street firms have teams of analysts working together to compile research and critique investment ideas, while individual investors have not had that advantage," Gill said. "Social media platforms like YouTube, Twitter, and WallStreetBets on Reddit are leveling the playing field."
"And in a year of quarantines and COVID, engaging with other investors on social media was a safe way to socialize. We had fun. The idea that I used social media to promote GameStop stock to unwitting investors is preposterous. I was abundantly clear that my channel was for educational purposes only, and that my aggressive style of investing was unlikely to be suitable for most folks checking out the channel."
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