The House Financial Services Committee summoned some of the key players in the saga to testify, including Robinhood CEO Vlad Tenev, Reddit CEO Steve Huffman, Citadel LLC CEO Kenneth C. Griffin, Melvin Capital CEO Gabe Plotkin and Reddit user Keith Gill, also known by his screen names "RoaringKitty" and "DeepF---ingValue."
The hearing came after an unprecedented series of events upended financial markets as an army of individual investors using do-it-yourself trading platforms such as Robinhood loosely organized on a Reddit forum and sent stock for struggling video game retailer GameStop soaring. GameStop shares skyrocketed some 1,600% in January, and hedge funds shorting the stock ended up losing heavily when they closed positions.
In the midst of the battle that seemingly pitted everyday investors against institutional Wall Street firms, however, some trading platforms, including Robinhood, abruptly restricted transactions on GameStop trades. The move drew immediate backlash from lawmakers on both sides of the aisle, though Robinhood later said this was not because it was trying to prevent people from buying the stock, but rather due to financial clearinghouse-mandated deposit requirements that increased amid the volatility.
The hearing, entitled "Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide," lasted over five hours and touched on a wide range of issues.
Committee Chairwoman Maxine Waters, D-Calif., said that this will be the first in a series of hearings to examine market volatility related to the GameStop episode.
"Many Americans feel that the system is stacked against them, and no matter what, Wall Street always wins," she said. "In this instance, many retail investors appeared motivated by a desire to beat Wall Street at its own game."
"And, given the losses that many retail investors have sustained as a result of volatility in the system, there are many whose belief that the system is rigged against them has been reinforced," she added. "Others have noted that there are winners and there are losers on every trade in our financial markets."
"Our role, as the Financial Services Committee, is to ensure fairness in our financial markets and system, robust protections for investors, and accountability for Wall Street," the chairwoman said.
Robinhood's Tenev opened by talking about how the company he co-founded helped break down traditional barriers for many to enter financial markets -- though he was interrupted by Waters who urged him to focus on the events on Jan. 28. Tenev also refuted allegations that trading restrictions in the aftermath of the GameStop volatility were put in place to help hedge funds.
"There are two points I want to make clear about the temporary restrictions: First, Robinhood Securities put the restrictions in place in an effort to meet increased regulatory deposit requirements, not to help hedge funds," he said.
"Second, Robinhood immediately secured additional funds," he added, saying what happened in January won't happen again.
Tenev then delved into how the clearinghouse processes currently operates, and advocated for real-time settlement rather than the current system, which takes two days for an equities transaction to be cleared and settled by a clearinghouse.
"There is no reason why the greatest financial system in the world cannot settle trades in real time," Tenev said.
Tenev faced immense pressure from lawmakers, who pressed the CEO on Robinhood's reported liquidity issues, how it earns money and more.
Tenev said the company is "not going to be perfect" and wants to "make sure we don't make the same mistakes twice."
Griffin, the chief executive of Citadel, opened by distancing Citadel from Robinhood's decision to restrict certain transactions in late January.
"I want to be perfectly clear: we had no role in Robinhood’s decision to limit trading in GameStop or any other of the 'meme' stocks," Griffin said. "I first learned of Robinhood’s trading restrictions only after they were publicly announced."
Griffin added that the events have highlighted opportunities to improve markets and called for shortened settlement cycles, as Tenev did.
Plotkin of Melvin Capital -- a hedge fund that took a significant loss amid the GameStop saga -- similarly said his firm had nothing to do with Robinhood's embattled decision to restrict trading for some stocks.
"I understand that part of the focus of this hearing is the decisions of stock trading platforms to limit trading in GameStop," Plotkin said. "I want to make clear at the outset that Melvin Capital played absolutely no role in those trading platforms’ decisions. In fact, Melvin closed out all of its positions in GameStop days before platforms put those limitations in place."
"Like you, we learned about those limits from news reports," Plotkin added.
Moreover, Plotkin said that contrary to many reports, "Melvin Capital was not 'bailed out' in the midst of these events."
"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," he said.
Reddit's Huffman discussed the platform's role in the drama and advocated for the r/WallStreetBets community.
"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," Huffman stated. "I’m proud they used Reddit to do so."
Huffman said that an internal investigation found that bots, foreign actors or others players were not involved in the GameStop-related activity on r/WallStreetBets.
Finally, Gill -- the Reddit user many say initiated GameStop's surge -- discussed how he touted GameStop stock as a value investment to his online base because he believed in the company.
The individual investor who goes by the YouTube screen name "RoaringKitty" opened by telling lawmakers that he is "not a cat."
Gill said he grew up shopping at GameStop and believes the company still holds value, emphasizing he is not a hedge fund or someone who provides investment advice for fees or commissions.
Gill said the r/WallStreetBets forum is where everyday investors came to discuss stocks, similar to how they would if they gathered at a bar.
"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 Reddit are leveling the playing field."
Gill ended his opening remarks by saying he remains "bullish" on GameStop stock. GameStock stock saw a short-lived spike shortly after Gill spoke -- though it ended up closing Thursday at $40.69, one of its lowest levels in weeks.