Ken Griffin: The Hedge Fund Titan In The Middle Of The Reddit Investing Revolt
The stock market madness that began with GameStop last week is subsiding. Leaving plenty of noise, confusion, and finger-pointing in its wake.
The situation has become a sort of Rorschach test for whatever ideology you might view it with. And in those ink blots, many people are seeing one man emerge: Ken Griffin, founder and CEO of the investment firm Citadel, LLC.
After founding Citadel in 1990, Griffin has built the firm into one of the biggest financial players in the country, with more than $30 billion in capital, and a hand in nearly every corner of the financial system.
To start with, Citadel runs a hedge fund. And the online frenzy in the past two weeks has turned the ire of the vehemently online against all hedge funds— meme-ing them into a generic enemy.
Citadel didn't respond to NPR's request for comment.
A quick browse through the popular reddit forum r/wallstreetbets shows posts like this one: "Know Thy Enemy: Kenneth C. Griffin, the Barbarian Behind the Gates of the Citadel," with dozens of replies and comments.
When Melvin Capital, one of the funds at the center of the GameStop debacle, lost some 50% of its holdings in the trade, Griffin's Citadel and billionaire Steve Cohen's Point72 Asset Management stepped in to bail out the fund with a $2.75 billion cash infusion.
But another arm of Citadel has also drawn plenty of attention from those inclined to see a rigged system in the recent stock market saga. It's Citadel Securities, which is what's known as a market-maker.
Market makers basically act as used car dealers for the stock market, according to James Angel, associate professor of finance at Georgetown University. They buy stocks from willing sellers and hold them briefly until they can connect with a willing buyer— making them middlemen on a massive scale.
"They sell the service of convenience to investors," Angel says. "Because when your buy order comes in to the market, it's usually not going to come in at exactly the same moment as somebody else's sell order. So you either have to wait around, spending your time and risking that the market's going to move, or you can trade immediately with a market maker."
Citadel Securities buys large amounts of mom-and-pop orders from brokerages like Robinhood and others, earning a penny or perhaps two on each transaction.
Citadel Securities is one of the biggest market makers in the global financial system. So when trading activity and volume went to the moon last week, Citadel's market maker arm raked in cash.
Even one of more niche aspects of this saga can be turned into a tale of Citadel. When meme stock investors flocked to trading silver this week, Redditors became a camp divided. Users learned that, lo and behold, Citadel does big business in silver. Accusations flew of a false flag operation; perhaps hedge funders were posing as Redditors to lead a silver rally that would actually inure to their benefit.
Point being: Wherever there's been crazy market action these past two weeks. Ken Griffin's company was there.
In fact, Treasury Secretary Janet Yellen has called a meeting to discuss the meme stock situation. And according to Reuters, obtained a special ethics waiver to do it—because she's taken hundreds of thousands in speaking fees from Citadel. [Copyright 2021 NPR]
