Still, as they say, you don’t get rich by spending money, and the above—to say nothing of dinosaurs and historical documents and nice things to put on the wall—notwithstanding, it has to be said that Griffin has gotten rich in part by being somewhat selective about how he spends his money, i.e. as much as possible on the things he wants and as little as possible on those he doesn’t, like taxes. And he’s found another public good he’d really rather not pony up for.

Brokers are calling for the regulator to suspend proposed new billing schedules that would force them to contribute to the costs of the CAT system, or Consolidated Audit Trail, a real-time record of all activity across US equities and options markets, which has been likened to a “Hubble Telescope” for securities markets.

Exchanges have so far footed the bill for CAT. But unless the US Securities and Exchange Commission takes action in the coming weeks, brokers will begin racking up charges dating from Tuesday….

Citadel Securities, which is controlled by billionaire Ken Griffin, has warned the SEC that it would “be left with no choice but to seek appropriate judicial relief” if the agency did not suspend the billing by next week.

In a letter last week it described the latest filings as “brazen” and “an effort to extract hundreds of millions of dollars from broker-dealers such as Citadel Securities”.

Citadel Securities leads fight over payments for market surveillance system [FT]
Citadel's flagship fund up roughly 1% in August, says source [Reuters via Yahoo!]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker. 

Over three days, the students will play the role of hedge fund traders, negotiating with counterparts, writing code, and devising automated strategies based on simulations with news feeds and macro data. It’s all part of a roughly 11-week program to prepare them for the often secretive world of trading and market-making, earning about $120 an hour along the way, or $19,200 a month.

The students are interns, among the less than 1% of 69,000 applicants selected. And the rewards go beyond the salary, which remains above-market even after intern pay at hedge fund and prop-trading shops soared by nearly one-third.

The students flew business class from as far away as California and Singapore to spend several nights at the five-star Fullerton Ocean Park Hotel in Hong Kong. Trays of crab meat salad, mini croque-monsieurs and skewers of prosciutto and melon sat nearby.

That certainly sounds better than Kohler, Wisc. But it’s not all fun and hors d’oeuvre, of course. This is Citadel, where waterboarding is a standard part of the job interview. First, there are the professional trainers to teach them the Ken Griffin way (keep those e-mails under 60 words, be sure to use the right facial expression, etc.). Then there are the personality tests. Only then is it time to start coding, not that the testing has stopped.

Over the nearly three-month program, the students are evaluated on skills that go well beyond algebra. These include their level of curiosity and ability to take feedback and ask the right questions. They’re gauged on how well they collaborate with teammates, and how fast they adapt and pivot when new information is presented. It’s an intricate balance: they have to compete with each other and be a team player at the same time…. Even meals are a test. One of the many markers for the students is their interaction with company leaders during networking dinners, which this year were held at the chic Madame Fu and Porterhouse restaurants in Hong Kong.

Given Griffin’s focus on returns, it has to be said that those on these sorts of programs really aren’t great.

While Citadel and Citadel Securities don’t disclose their hiring rate, only “the truly outstanding” make the cut, [Citadel Asia-Pacific human resources managing director Kristina] Martinez says.

“Usually very early on in the internship you can identify the stars, the truly exceptional ones and this is when we tell the managers to go learn everything about who they are as individuals’’ to secure their return, she said.

Enjoy the crab, while it lasts.

Citadel Vets 69,000 Intern Applicants to Find Next Math Geniuses [Bloomberg]

Above all, however, he is a stickler for the secrecy of the things that make him a lot of money, willing to go to extraordinary lengths (or make his employees do so) to keep things like Citadel’s high-frequency trading code, algorithms and the like properly proprietary. So concerned with keeping such things under his control is Griffin that he’d even rather  violators of his pecuniary privacy go unpunished than further risk its security. And surely, you’d think, after getting a young coder locked up for three years for stealing his secrets, among all of the other things Griffin has done to harry and punish those he believes to have wronged him similarly, the message would have gotten across. Alas, apparently if still allegedly, not:

[Citadel Securities] claims Leonard Lancia and Alex Casimo started raising capital and building their high-frequency trading firm, Portofino Technologies, while still working at Citadel Securities with access to proprietary information…. The pair “engaged in a brazen scheme to steal Citadel Securities’ trade secrets, lie to their Citadel Securities colleagues and raid the ranks of Citadel Securities’ employees,” the firm wrote in the complaint, filed in state court in New York….

In an internal investigation, Citadel Securities found messages and a pitch deck from Portofino’s early fundraising efforts, months before the pair announced their intent to leave the firm, according to the complaint. In one exchange, Casimo offered a potential partner information related to “latency considerations for HFT trading,” the firm alleges in the suit.

Citadel Securities previously filed a non-compete complaint against another former employee who later joined Portofino, Vincent Prieur.

Citadel Securities Alleges Ex-Employees Stole Trade Secrets [Bloomberg]

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When it comes to the controversial practice of payment for order flow, by which the likes of Citadel Securities and Virtu Financial pay handsomely to underwrite the “free trading” offered by Schwab or TD or, say, Robinhood by those firms, in the form of “rebates” that make up 80% of the money earned by, just taking a random example, Robinhood, Securities and Exchange Commission Chairman Gary Gensler—as expected—is going with the latter, and like Henry IV before him expects them to be grateful.

After taking a hard line for months, senior SEC officials have signaled in recent meetings with executives that a ban is no longer on the table, the people said, asking not to be named discussing private conversations.

Not that this is necessarily much to celebrate for beneficiaries of the same, as the market quickly realized.

The SEC is considering a move to lower access fees that exchanges charge brokerages to execute trades for some stocks, which could push more trading onto the exchanges, the people said.

The agency also may propose changes that could affect the complicated system of rebates that exchange operators use to lure trading volume, they said. Additionally, the regulator is weighing a plan to force brokers to disclose more about how much trading with them costs compared with benchmarks, a metric known as price improvement, said the people.

The SEC may also seek to clarify requirements for brokerages to provide “best execution” for stock orders, according to the people….

Even without a ban, taken together, the changes could make payment for order flow less profitable.

Shares of Robinhood fell 2.7% on the day after being up more than 11% earlier in the session…. The company’s stock is down more than 40% year to date as the brokerage firm has seen user growth reverse after rapidly expanding during 2020 and 2021.

SEC Set to Let Wall Street Keep Payment-for-Order-Flow Deals [Bloomberg]
Robinhood jumps, then fades after report that SEC will not ban payment for order flow [CNBC]

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"Miami is a vibrant, growing metropolis that embodies the American Dream. I am excited to have recently moved to Miami with my family….”

Which is a bold statement for a man who not that long ago forced his ex-wife to stay in Chicago. Oh, and also: We (and, eventually, Ken himself) told you so.

Thursday, in a letter to employees, hedge fund manager and billionaire Ken Griffin announced that, after more than 30 years in Chicago, his investment firm Citadel would be relocating to Miami.

Mr. Griffin said the new headquarters would be on Brickell Bay, “in the heart of Miami’s booming financial district.”

Seems like KG’s recent philanthropy was more than a bit self-interested. Anyway, in an uncharacteristically gracious approach, Griffin said that Chicago had been “a remarkable home for Citadel” and didn’t mention his real reasons for ditching the Windy City: The stubborn refusal of Illinois voters—even Republican ones—to do as he pleased, and his argument that crime has made Chicago an even worse place to live than Afghanistan (a comparison which is not aging well). Which is probably for the best, because the latter, at least, is bullshit: Crime in Miami is every bit as bad if not worse than in Chicago. And it’s also probably why Griffin is not going the full Icahn and forcing his underlings to get used humidity and hurricanes, or even pretending South Florida is where all or even most of his Chicago-based team are clamoring to live.

“Chicago will continue to be important to the future of Citadel, as many of our colleagues have deep ties to Illinois,” Mr. Griffin wrote. “Over the past year, however, many of our Chicago teams have asked to relocate to Miami, New York and our other offices around the world.”

The move is expected to be a multiyear process and will involve developer Sterling Bay and architecture firms to design a new office tower. There are currently about 1,000 employees in Chicago and many are expected to remain.

"We recognize that the choice of where to call home involves personal, family, school and other considerations, and we will provide comprehensive support to meet the needs of our teams."

Ken Griffin Moving Citadel From Chicago to Miami Following Crime Complaints [WSJ]
Billionaire Hedge Fund Manager Ken Griffin Moving Citadel HQ Out of Chicago, Into Miami [NBC 5 Chicago]

“I grew up in a world where we were children of mutually assured destruction,” says Griffin, 53. “It was ‘get under your desk to brace for the impact of a nuclear blast.’ To see us return to the rhetoric of that moment is a huge setback….”

“The continued unfolding of this catastrophe in Ukraine is a giant unforced error by mankind,” he says.

And, as usual in Griffin’s mind, it’s the Democrats’ fault.

The unprecedented moves by Western powers to shut off Russia’s access to capital markets heralds the weaponization of the dollar, he says.

There will be serious repercussions, with Russia, China and others seeing no option but to diversify away from the greenback. De-dollarization by a China-Russia-Iran-Brazil trading bloc could easily morph into the exclusion of American companies and investors from fast-growing markets. “Have we laid the seeds for the setting of the American era of technological superiority?” Griffin asks.

And, as one particular Democrat might put it, that’s something Griffin might not be entirely objective about. But no matter: There’s at least one very good thing about the Russian invasion of Ukraine and its sanctions-filled aftermath for Griffin: He might get a pretty decent soccer team out of it.

Sky News has learnt that the Ricketts family and the hedge fund billionaire Ken Griffin have hired Jefferies, the US-based investment bank, to advise on and potentially help finance a formal offer for the Blues.

Jefferies' appointment, alongside that of Lazard - another adviser to the Ricketts-Griffin bid - underlines how Wall Street banks are jockeying for roles on what could be the most lucrative sale of a sports franchise in history.

Billionaire Trader Ken Griffin Navigates A Flock Of Black Swans [Forbes]
Tale of Chinese spying the latest front in Pritzker-Griffin feud [Crain’s]
Chelsea FC sale: Chicago Cubs-owners fortify bid with new bank signing [Sky News]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

“No doubt, plaintiffs were gravely disappointed when Robinhood suspended purchases of the meme stocks and their holdings declined in value,” Judge Altonaga wrote. “But the law does not afford relief to every unfulfilled expectation….” In November, Judge Altonaga dismissed a related lawsuit in which investors accused Robinhood of colluding with electronic trading firm Citadel Securities to stop buying in meme stocks…. Robinhood welcomed the new court ruling. “Once more, this confirms that the unfounded allegations against Robinhood have no basis,” the company said in a written statement.

Not that the news is all good for the not-so-merry men.

Commission-free brokerage Robinhood Markets Inc on Thursday posted a $423 million net loss in the latest quarter, and its shares tumbled as much as 15% in after-hours trade even as revenue edged past analysts' estimates…. Shares of Robinhood sank as much as 15% to $9.98 in extended trading following results. The share price at its IPO in July last year was $38, and its record high in August was $85….

Transaction-based revenue from cryptocurrencies jumped 304% to $48 million in the fourth quarter, while revenue from equity trading declined 35% to $52 million.

Hmm. Not sure how well the former’s gonna hold up during the crypto winter, especially given that

[I]ts monthly active users declined 8% from the previous quarter to 17.3 million as retail investors pulled back from the market.

Still, [CFO Jason] Warnick said that "there is nothing to suggest our customers are disengaging."

Really, ‘cause a sizeable drop in active users sure looks an awful lot like customers disengaging. But then again, we’re talking about a company that sees a threat to more than $7 of every $10 it takes in as NBD.

Robinhood derived approximately 72% of its revenue from PFOF and other transaction rebates in the fourth quarter of 2021.

It has said it does not expect the SEC to ban the practice, but expressed confidence it could find other ways to generate revenue, possibly executing client orders internally.

Of course, if that’s not enough Schadenfreude for those who believe they were robbed by the nefarious machinations of Vlad Tenev and Ken Griffin, they can also enjoy the continued travails of Gabe Plotkin.

As of the beginning of last February, Melvin had to post a 120% return to do [recoup its meme frenzy losses]…. From February through December, Melvin notched a 33.2% return, soundly beating most other such funds. But because losses that January shrank so sharply the pool of money it was investing, the gains during the rest of the year didn’t bring the firm close to making up the earlier losses.

What’s more, it seems like January just isn’t Gabe’s month.

Melvin lost about 17% in the first three weeks of the year….

An improvement, to be sure, but still, if only he knew how to read tweets like Senvest Management founder Richard Mashaal.

“[Elon Musk’s] piling on with that tweet for us was … we all looked at each other, and thought how do you top that?” Richard Mashaal, Senvest Management’s founder, CEO and co-CIO, said in an interview. “And so for that, for us, that signified peak momentum and we proceeded to exit the rest of our position.”

The Tesla CEO tweeted “Gamestonk!!” on Jan. 26, 2021, after the bell. The next day, GameStop reached its closing top of $347.51 apiece, when Senvest dumped its bet.

Robinhood Meme-Stock Negligence Suit Is Rejected by Judge [WSJ]
Robinhood posts $423 million net loss, shares sink after hours [CNN Business]
Hedge Fund Melvin Lost $6.8 Billion in a Month. Winning It Back Is Taking a Lot Longer. [WSJ]
The fund that made $700 million on GameStop knew it was time to sell after an Elon Musk tweet [CNBC]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

“I never thought we’d let our ownership stakes be dictated by a poll on Twitter,” the hedge fund manager said Wednesday at the New York Times DealBook conference. “We live in a whole different world.”

And while the Citadel chief may shake his head a bit about Elon Musk’s antics, he has to say he understands where the guy is coming from vis-à-vis wanting to get the hell out of a high-tax state and into a low-tax, poorly-governed one (although not the bit about owning no houses, as Griffin’s plan to acquire the entirety of Miami’s Star Island continues expensively apace).

Griffin, for his part, said he likes to see companies controlled by their founders, and that he doesn’t want tax policy to drive “great entrepreneurs” like Musk out of their roles.

Anyway, in order to truly prepare for this bizarro world, Ken needs some help, and also $1.15 billion, which he’s happy to accept from an anti-dollar jihadist if that’s what it takes.

Venture-capital firm Sequoia Capital and cryptocurrency investor Paradigm have agreed to invest $1.15 billion in the Chicago-based firm, the company told The Wall Street Journal. Sequoia partner Alfred Lin will also join Citadel Securities’ board…. The deal will give Citadel Securities capital to continue expanding globally, the company said, and could be a precursor to an initial public offering for the business.

Citadel Securities to Receive First Outside Investment [WSJ]
Who’s the Chicago billionaire behind the record $75 million Star Island home buy? [Miami Herald]
Griffin Calls Musk’s Tesla Poll a ‘Whole Different World’ [Bloomberg]

A long-awaited report from the Securities and Exchange Commission on the hyperbolic trading in shares of the struggling video game retailer and other stocks found that everything worked largely the way it was supposed to.

The 45-page report, released on Monday, suggested no policy changes in response to the heavy trading in GameStop and other little-regarded shares that soared in value, thanks in part to posters on Reddit and Twitter, where many have gathered amid a pandemic boom in amateur trading.

SEC staff found no evidence of hedge funds “naked shorting,” i.e. short-selling shares that hadn't been borrowed, as some online posters claimed.

It also ruled out the possibility that players like Citadel Securities were snapping up GameStop stock to hedge against the call options they were themselves writing.

No matter! Gensler has had his eye on payment for order flow, gamification, cryptocurrencies and all the rest of it for months, and the fact that his own people found that everything worked exactly as it should have done will not change that.

“Consideration should be given to whether game-like features and celebratory animations that are likely intended to create positive feedback from trading lead investors to trade more than they would otherwise,” the SEC said in Monday’s report.

“Our markets have moved to zero commission, but it doesn’t mean it’s free. There’s still payment underneath these applications. And it doesn’t mean it’s always best execution,” the SEC chief said on CNBC’s “Squawk on the Street….”

“We’ve had cases that we’ve announced in the last 18 months where there has been this conflict between the broker on the one hand and this payment for order flow on the other,” Gensler added…. Gensler added Tuesday morning that the SEC is now turning its attention to short selling, settlement, conflicts involving digital engagement practices and market structure. Then the commissioners will weigh in and the agency will put the recommendations out for public comment, he said.

Perhaps he’ll take a page out of the usually very limited playbook of German regulators, who do not like what they see in their country’s newly-minted second-most valuable bank.

N26 on Monday said the regulator, BaFin, had ordered it to limit new European customers to 70,000 a month….

Regulators have repeatedly found problems with N26’s internal controls, which banks are expected to maintain as a front-line defense against money laundering and other illegal activity…. In June, BaFin fined N26 €4.25 million, or about $5 million, for not making timely submissions of required filings that flag suspicious customer transactions, often a tip-off to authorities for illegal activity. In May, the agency told the bank to beef up its anti-money-laundering controls and appointed a monitor to oversee the process, an unusual step to ensure compliance.

S.E.C. Describes the GameStop Frenzy, but Not What to Do About It [NYT]
SEC debunks conspiracy theories about meme stock mania [Axios]
SEC’s GameStop Report Questions ‘Game-Like’ Trading Apps [WSJ]
SEC chief Gensler says regulator assessing future of payment for order flow [CNBC]
German Fintech N26, Newly Valued at $9 Billion, Again Draws Regulator’s Eye [WSJ]
Fintech firm N26 is now worth more than Germany’s second-largest bank [CNBC]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

As things l’affaire GameStop really ramped up, someone at Citadel (the names have been redacted) noted to Robinhood’s deputy general counsel, “we obviously have a strong relationship between the two firms.” The day before the restrictions were imposed, Robinhood’s top brass had a 5 p.m. chat with Citadel, with founder Vlad Tenev wondering if “Maybe this would be a good time for me to chat with Ken griffin.” Why ever would that be, Vlad? An hour and a half after the call began, Robinhood President Jim Swartout said in an internal chat, “you wouldnt believe the convo we had with Citadel. total mess.”

It is indeed, Jim, for in spite of your later and potentially exculpatory bitterness toward Citadel (“I am beyond disappointed in how this went down. It’s difficult to have a partnership when these kind of things go down this way.”), Ken Griffin & co. feel compelled to deign to address it.

Citadel Securities in a statement Tuesday rejected “Internet conspiracies and Twitter mobs” that have again accused the firm of pushing Robinhood Markets Inc. and other brokerages to limit trading in GameStop and other meme stocks on Jan. 28, a move that resulted in losses for many small investors.

"Citadel Securities never requested, intimated, agreed or otherwise sought to limit or to restrict the trading of such securities," Citadel Securities said in a statement to Reuters on Tuesday.

Citadel Securities Faces New Pressure Over GameStop Frenzy [WSJ]
Citadel Securities denies involvement in 'meme stock' trading restrictions [Reuters]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

Thing is, the only way Griffin was going to get legal satisfaction over the matter would have been to let other people—judges and lawyers, specifically—see the secrets he works so hard to keep secret so as to allow them to determine just how secret the secrets were, because GSA rather irritatingly insisted that there wasn’t really anything very secret about the things it had seen, regardless of how secret it aimed to keep the fact that it was trying to see them, and anyway it wasn’t trying to launch a high-frequency trading strategy anyway, in spite of requesting a trading plan from a high-frequency trader. And so, unusually, to preserve whatever secrecy was left, and unusually in a legal battle over his beloved secrets, Griffin has apparently decided, in this one instance, that discretion is the better part of valor.

Ken Griffin’s market maker and GSA Capital Partners LLP reached a confidential settlement, GSA said in a statement Thursday…. The two firms “recognize and respect the importance and value of the other’s rights over their confidential information and intellectual property,” GSA said.

Citadel Securities didn’t respond to a request for comment. The firm was seeking at least $40 million in damages.

Citadel Securities Settles With Fund Over Secret Algorithm [Bloomberg]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.

Which brings us to the concept of free stock trades. Sure, you can log on to your Schwab or TD or Robinhood account and buy or sell a share commission-free, if in fact the service of your choice is able and willing to make the trade you’d like. And this may seem genuinely free, since rules and regulations of course require those platforms to conform with “best execution obligations,” one of which is getting a customer the best price possible. So, here’s something that’s truly free, yes?

Well, the fact that Robinhood, et. al.’s trading costs are eagerly covered by the execution firms paying for that order flow is a pretty good sign that, yea, nothing is truly free. And in the wake of l’affaire GameStop—and the forced retirement from public service of one Jay Clayton—this incongruity has finally occurred to the Securities and Exchange Commission, with a little nudge from an old friend, of course.

“When big sharks like Citadel and Robinhood come out ahead no matter what happens, and when the information they gather isn’t disclosed, and when it’s secret how that information is used, it’s easier for these giants to skim off the top at the expense of small investors,” the Massachusetts Democrat said in a Senate Banking Committee hearing on wild market swings in shares of the gaming retailer and other stocks.

In a letter made public Tuesday, SEC Acting Chairwoman Allison Herren Lee said regulators should examine such arrangements to make sure practices are fully disclosed and “consistent with best execution obligations….” Ms. Lee’s letter also said the SEC should consider new regulations, such as greater disclosure of short selling and steps to ensure small investors understand how options work.

GameStop Saga Prompts SEC to Weigh Review of Payment for Order Flow [WSJ]
Warren Says ‘Sharks’ Citadel, Robinhood Prey on Customers [Bloomberg]

But Wall Street and r/WallStreetBets, hear him out! Ken Griffin is not your oppressor but your friend! Not your persecutor but your protector from the very sort of shenanigans which you accuse him of, by the very people that the ludicrously uninformed Michael Lewis has wrongly championed as your champions! People of the retail securities market, unite with him against your true enemies, upstart anti-high-speed-trading exchange IEX and its swampy enablers at the SEC!

Citadel Securities asked a court to overturn the SEC's bipartisan approval of a trading method launched by IEX Group… IEX says D-Limit acts like a regular limit order except when the exchange's algorithms predict a price is about to change./

However, Citadel Securities is arguing D-Limit does the opposite of protecting investors…. Citadel Securities accused the SEC of having "ignored" evidence that retail investors would be "harmed" by the D-Limit order. The firm cited its own analysis that found more than half of its trading activity on IEX was on behalf of retail investors, not for its own profit….

"Imagine a grocery store that has deliberately installed extra-long conveyor belts on its checkout lines," the company argues in the filing. In theory, the store could use that extra time to determine if any items have sold out at rivals' stores./"If so, the store's computers quickly raise its own price before your item reaches the cashier," the filing says.

Yes, says the IEX and its allies: Imagine it. Because that’s all it is: Ken Griffin’s lurid, self-serving imagination.

IEX's D-Limit, along with the exchange's other technology, can "protect investors against predatory" trading strategies, Lev Bagramian, senior securities policy advisor at Better Markets, told CNN Business in an email./

Kelleher said D-Limit would shield investors specifically from Citadel Securities -- and by extension hurt the firm's booming revenue.

"Presumably that's why Citadel vehemently opposed IEX's D-Limit order type," Kelleher said.

High-speed trading firm linked to Robinhood is going to war with the SEC [CNN Business]
Reddit crowd turn fire on market maker Citadel [Telegraph]
Elizabeth Warren wants answers on Robinhood’s ties to large hedge funds [CNN Business]
Citadel, Robinhood on Waters’s ‘Wish List’ for GameStop Hearing [Bloomberg]

“Brokers are now ‘protecting’ customers as a facade so that they can appease their institutional backers,” one individual trader told Bloomberg. “The entire community is outraged….”

An unlikely mix of lawmakers — including Representative Alexandria Ocasio-Cortez and Senator Ted Cruz — accused Robinhood of imposing trading limits to help out hedge funds caught out by the retail trading frenzy. The heads of the Senate Banking Committee and the House Financial Services Committee called for hearings.

The SEC issued a rare joint statement from its acting chair and commissioners that said it was working closely with other regulators and stock exchanges “to protect investors and to identify and pursue potential wrongdoing” and would “closely review actions ... that may disadvantage investors” or hinder their ability to trade stocks…. Texas Attorney General Ken Paxton issued 13 civil investigative demands, the civil equivalent of a subpoena, on Friday to Robinhood and others that put curbs on stock trading, calling it “shockingly unprecedented and wrong.”

“Robinhood? Nah y’all ROBBING the HOOD,” tweeted one user. “Crazy how you guys would rather watch your company burn to the ground than live up to your promise to provide users with free trade,” commented another.

Twitter users also complained that Robinhood appeared to be selling their shares without authorization….

A Robinhood customer filed a class-action lawsuit against the stock-trading app Thursday after the company barred traders from buying shares of GameStop promoted by WallStreetBets, a popular Reddit group for investors…. "Robinhood's actions were done purposefully and knowingly to manipulate the market for the benefit of people and financial institutions who were not Robinhood's customers," the lawsuit states….

Following Robinhood's decision earlier Thursday morning, Redditors stood up a new forum, r/ClassActionRobinHood, to coordinate efforts for a lawsuit. It collected more than 31,000 users Thursday.

One law firm that Redditors have engaged with is ChapmanAlbin LLC, based in Cleveland, Ohio, which specializes in investments and financial fraud. The firm's homepage currently has a prompt titled, "Are you a Robinhood user who has suffered losses?" along with a way for people to submit information.

The firm has collected information from more than 6,000 people as it investigates Robinhood, attorney Philip Vujanov told CNN.

The decades-old Public Access to Court Electronic Records (PACER) system buckled under extreme pressure on Thursday as thousands of end users frantically attempted to download lawsuits filed against online stock trading application Robinhood.

Customers flooded Google’s Play Store with angry, one-star reviews about the restrictions, tanking its average rating to 1 star out of 5.

Oof. Given the level of anger towards both Robinhood and the hedge funds its users apparently believe it’s protecting, it doesn’t seem likely that its “we had no choice” argument will carry much sway, however much evidence it has for its veracity.

In its update on Thursday afternoon, Robinhood defended itself against accusations of favoring big traders, saying it had made the decision to limit trades because of “financial requirements, including SEC net capital obligations and clearinghouse deposits.”

“To be clear, this was a risk-management decision, and was not made on the direction of the market makers we route to,” the company said.

“We understand our customers are upset, we’re doing what we can to re-enable buying in these names,” [CEO Vlad Tenev] said. “We want to be clear in the communications, and I own that we should have been out there a little bit sooner.”

“It’s not really Robinhood doing nefarious stuff,” said Bloomberg Intelligence analyst Larry Tabb. “It’s the DTCC saying ‘This stuff is just too risky. We don’t trust that these guys have the cash to be able to withstand settling these things two days from now, because in two days, who knows what the price could be, it could be zero.’”

Robinhood, the online trading app, said on Thursday that it was raising an infusion of more than $1 billion from its existing investors…. To continue operating, it drew on a line of credit from six banks amounting to between $500 million and $600 million to meet higher margin, or lending, requirements from its central clearing facility for stock trades, known as the Depository Trust & Clearing Corporation.

Robinhood still needed more cash quickly to ensure that it didn’t have to place further limits on customer trading, said two people briefed on the situation, who asked to remain anonymous because the negotiations were confidential.

Robinhood, which is privately held, contacted several of its investors, including the venture capital firms Sequoia Capital and Ribbit Capital, which came together on Thursday night to offer the emergency funding, five people involved in the negotiations said.

Brokers that route investors’ orders to Susquehanna International Group LLP and Wolverine Trading LLC had difficulty connecting to the firms on Wednesday and routed their trades elsewhere, people familiar with the matter said…. Two Sigma Securities LLC, which also fills orders for individual investors, faced technical difficulties because of the heavy load, a person familiar with the matter said…. Online brokerages themselves have struggled to keep up with the flood of trading activity. In recent days, clients of Fidelity, E*Trade Financial Corp., Charles Schwab Corp. and Vanguard Group have experienced various levels of service disruptions.

And, given the anger evident above, and also directed towards some other big players in the unfolding drama, Ken Griffin wants his name kept out of it.

“Citadel is not involved in, or responsible for, any retail brokers’ decision to stop trading in any way,” a spokesperson for the hedge fund said in a statement.

“Citadel Securities has not instructed or otherwise caused any brokerage firm to stop, suspend, or limit trading or otherwise refuse to do business,” the statement added. “Citadel Securities remains focused on continuously providing liquidity to our clients across all market conditions.”

GameStop rallies back as U.S. regulators eye wild trading [Reuters]
Robinhood Says it Will Reallow GameStop Trades [NYT]
Why Robinhood Had to Risk Infuriating Its Customers [DealBook]
Robinhood, in Need of Cash, Raises $1 Billion From Its Investors [NYT]
Robinhood Fallout Sweeps Market After $1 Billion Lifeline [Bloomberg]
Robinhood is new eye of GameStop storm as outrage grows [Reuters]
Class-action lawsuit filed against Robinhood following outrage over GameStop stock restriction [CNN Business]
PACER Crashed Because Too Many People Tried to Read Lawsuits Against Robinhood [Law & Crime]
Citadel shoots down Robinhood link [Fox Business]
GameStop Frenzy Causes Glitches for High-Speed Traders [WSJ]

Anyway, all of the above and whatever else we don’t know about are definitely not enough for Ken Griffin.

In Los Angeles, luxury real-estate agents said Mr. Griffin has eyed several properties, including a $125 million Bel-Air mansion owned by plastic surgeon and rhinoplasty specialist Dr. Raj Kanodia and Owlwood, a historic Holmby Hills estate once owned by Sonny and Cher and listed for $115 million….

Mr. Griffin has also eyed an apartment at the Peninsula London, an under-construction development less than 2 miles away [from his Carlton Place mansion]…. He could “choose depending on the mood he’s in which one he wants to stay in,” he joked of Mr. Griffin.

(Oh, and also: We were totally right about that other place in Miami Beach Griffin just bought to go along those aforementioned penthouses four miles away:)

In August, Mr. Griffin spent a combined $69.5 million to purchase three sites on Miami’s Star Island, a tiny enclave of roughly 30 homes and whose residents have included Rosie O’Donnell and Gloria Estefan…. A person familiar with Mr. Griffin’s search said he often buys properties near his companies’ offices or family, and said his recent purchase on Star Island came in advance of Citadel opening an office in Miami in the next year or two.

Nor is Ken focused exclusively on real-estate dominance.

Electronic trading giant Citadel Securities will bolster its already huge presence at the New York Stock Exchange by buying the NYSE market-making business of smaller rival IMC Financial Markets…. If it is completed, Citadel Securities would oversee trading for more than half of the securities listed on the exchange. It would also reduce the number of DMM firms at the Big Board to three from four, potentially raising concerns that the DMM business is becoming overly concentrated….

Citadel Securities trades more than one in five of the shares that change hands in the U.S. stock market each day. It

And just how much will it cost for Griffin to become the undisputed king of the castle of capitalism? Well, a hell of a lot less than he’d spend on an actual castle, that’s for sure.

Terms of the Citadel Securities-IMC transaction weren’t disclosed, but a person familiar with the matter said the price was in the tens of millions of dollars.

How Citadel CEO Ken Griffin Built a $1 Billion Private Property Portfolio [WSJ]
Citadel Securities to Buy NYSE Market-Making Unit of Smaller Rival IMC [WSJ]

A quick check of JetTracker.xyz shows plenty of flights to and from Chicago, Teterboro and a variety of airfields on the east end of Long Island, more or less settling the question of where Griffin has chosen to base himself during the pandemic. There are a handful of flights to Colorado and, yes, Florida, as well as one earlier this month to one of the only countries in the world that will have us, Croatia.

And then there are the Wisconsin flights: Waukesha, Kenosha (before last week, for what it’s worth) and Sheboygan.

The first two almost make sense: Griffin spent much of his childhood near Waukesha, and is known to go to great lengths (well, his driver is, anyway) to obtain the milkshakes of his youth. But Sheboygan is a bit far afield for those purposes; indeed, it’s only a little bit closer LeDuc’s Frozen Custard than Chicago itself. What’s bringing Air Citadel to the Malibu of the Midwest? Surely, Griffin doesn’t need to go to Kohler headquarters to pick out bathroom fixtures for the future Griffin Estate, and the Brat Days have been cancelled due to COVID.

It turns out that Steve Cohen’s not the only one running a special academy, and the Palm Beach Four Seasons isn’t the only luxury resort that Citadel has booked solid for plague season.

The company has set up an additional bubble specifically for interns to have an in-person experience for the summer in Kohler, Wisconsin, at the American Club Resort, where a standard room can cost $ 400 a night.

The schedule went as follows: The company’s 235-person internship class began practically on June 15, and the 135 people who attended the bubbles in person isolated themselves in corporate housing in Chicago and in New York City for two weeks before the company ships them to their respective bubbles on July 19. In Florida, the only interns present worked for Citadel Securities, while the approximately 100 interns who traveled to Wisconsin worked in the various activities of the company….

The company landed on the Wisconsin site because of its proximity to Chicago – it’s just over two hours drive from Citadel headquarters – as well as the rural surroundings, as the town of Kohler has just over 2000 people. Citadel has naturally invested a lot of resources in upgrading the station’s technological infrastructure, as well as creating a workspace for 150 people in the main ballroom….

Remote summer internship inside Citadel at a luxury resort in Wisconsin [BI via FR24 News]

Well, something in this calculus has changed.

A company tied to billionaire hedge fund manager Ken Griffin paid $37 million for a double-lot on Miami Beach’s Star Island…. Star Island — home to celebrities including Sean “Diddy” Combs, Gloria and Emilio Estefan, and most recently, Jennifer Lopez and Alex Rodriguez — is experiencing some resident turnover. Lopez and Rodriguez last week spent $32.5 million for the mansion at 13 Star Island Drive, next to the property that Miller just sold.

Surely, you say, there’s a good explanation for this. For one, who wouldn’t jump at the chance to live next door to the next owners of the New York Mets, if for no other reason than to tweak Steve Cohen again? Plus, he never really gave up on Miami, since the sale of the two aforementioned penthouses did not actually go through. And, really, why not? Griffin owns ridiculously expensive homes in all sorts of cities where he doesn’t spend much time at all, and even owns a ridiculously expensive seaside getaway from the most ridiculously expensive of those.

Well, we here at DB quarantine HQ—a luxurious 1,000-square-foot second-floor apartment with a shared driveway somewhere in between Griffin’s midtown aerie and his Hamptons compound—have a theory of our own. Citadel is, as we say in these days of the plague, becoming ever-more decentralized, with new offices in Austin and now Singapore joining Citadel’s other 15 bases, which include two growing ones in China.

Now, Griffin’s got two homes in the vicinity of Citadel’s second city of New York (and which are convenient enough to its offices in Greenwich) and a rather spectacular new place just a tube ride away (ha ha ha) from its third-most important center, London. And, of course, Griffin’s got the most expensive residence (such as it is) in Citadel’s nominal hometown of Chicago.

But his growing real-estate portfolio in South Florida is entirely of the residential variety: Neither Citadel nor Citadel Securities list an office in the sunshine state. You can chalk up the Palm Beach condo to regular old billionaire stuff, but why the need for all the bedrooms in Miami? Is the Four Seasons Palm Beach simply too uneconomical a future headquarters, and anyway where will all of the Citadelers live after the entirety of Palm Beach is just Mar-a-Lago and the Griffin Estate anyway? Is Citadel planning to join Icahn Enterprises and Appaloosa Management in the home state of Griffin’s favorite U.S. Senator? (tips@dealbreaker.com is the e-mail address to use if you know the answer, by the way.)

Billionaire hedge funder Ken Griffin pays $37M for Star Island property [The Real Deal]

Over a two-year period until September 2014, the market-maker removed hundreds of thousands of large OTC orders from its automated trading processes, according to Finra. That rendered the orders “inactive” and so they had to be handled manually by human traders.

Citadel Securities then “traded for its own account on the same side of the market at prices that would have satisfied the orders,” without immediately filling the inactive orders at the same or better prices as required by Finra rules, the regulator said….

Nearly half of the 467 limit orders reviewed by the regulator in the six years until September 2018 were found to violate Finra’s requirements to display orders. The bulk of the violations were for failing to execute trades against existing quotations in a timely manner, Finra said.

Whoever could have seen such a conflict of interest coming at a trading outfit owned by a hedge fund manager?

US regulator fines Citadel Securities over trading breach [FT]

These being top-level Citadelers, any old hotel wouldn’t do, even in ritzy Palm Beach. Only the Four Seasons would suffice. And boy oh boy, are those lucky couple dozen making the most of their imprisonment in paradise.

With Palm Beach County beaches closed, orange cones on the sand delineate the hotel’s property. Over the weekend, guests played tennis on the resort’s immaculate green clay courts. At one point, music could be heard blaring from the resort.

The hotel is offering “reduced services” to its guests, Laurie Herrick, a Four Seasons spokeswoman, said in a statement. Restaurants are closed, though takeout and in-room dining options are available.

Sounds pretty sweet, but also apparently in violation of all of the rules Palm Beach County—unsurprisingly given the relative concentration of New Yorkers and the aged, the part of Florida hardest hit by coronavirus—has put in place to keep said coronavirus in check. Tennis and loud parties certainly don’t sound like they meet the social distancing guidelines, and “hotel staff catering to a handful of traders and their families” and “off-duty cops making sure no one without Citadel clearance is allowed in” sound particularly like essential workers, and filling up a hotel with people so recently in such COVID-19 hotspots at New York and Chicago certainly goes against the spirit of Gov. DeSantis’ xenophobic request (although that perhaps doesn’t matter if you give his campaign $6 million). Certainly, some of KG’s southern neighbors think something is amiss.

The town on Tuesday posted on its website that it had received “several messages of concern” regarding Citadel Securities’ presence at the Four Seasons after Bloomberg and later The Miami Herald reported about the firm’s temporary Palm Beach trading site.

“We have responded recently to the Four Seasons for several Violation of Town Ordinance complaints, but to date have not observed a citable violation,” the post said.

And how could there be, given that the town is temporarily considering the resort to be a slightly smaller version of Griffin’s private estate up the way.

The town is treating the property as a private residence where people inside can work — or swim in the pool — as they would in any home, said Michael Ogrodnick, a Palm Beach spokesman.

“As far as we’re concerned, they’re in their own bubble,” Mr. Ogrodnick said.

No Trading Floor? No Problem. A Financial Firm Quarantines at the Four Seasons. [NYT]

This nimbleness in the face of adversity can also be seen up the road from the ample social distancing space Griffin has assembled on the Florida coast, in the form of secured hotel in which he’s imprisoned 24 Citadel Securities staffers to make sure his little investment bank keeps up with the huge spikes in trading volume and volatility, no matter how long it requires keeping those employees away from their friends and families.

The firm opened a new, temporary trading floor in Palm Beach on Monday with 24 people, according to a memo from the firm to employees seen by Bloomberg…. The site -- with capacity for 50 -- is part of a hotel property that’s closed to the public, and the staff, who have been dispatched from Chicago and New York, will work and sleep there, according to the firm…. Citadel Securities built the infrastructure necessary for the Florida facility in less than a week.

Yup, he's still an absolute joy to work for.

Of course, one of the largest liquidity providers in the world probably can’t operate with just 50 people, so it’s also introducing some additional social distancing measures.

The move followed an initial business-continuity plan that involved splitting the New York group into a new space and adding a temporary office in Greenwich, Connecticut.

Ken Griffin’s Virus Plan Now Includes Emergency Trading Site in Florida [Bloomberg]
Citadel Gains 1.2%, Gelband’s Firm Falls: Hedge Fund Update [Bloomberg Quint]
This Hedge Fund Saw Risks of Coronavirus Early. Now It’s Up 36% [WSJ]
Cheyne Credit Fund Lost 25% in March on Bets Hit by Coronavirus [Bloomberg]

Since then, however, things have changed. Illinois’ wealthiest man appears to be planning to spend more time on the East Coast, where he’s built up something like three quarters of a billion dollars’ worth of places to rest his weary head, including the most expensive home in the entire United States and a nine-figure beach getaway in the vicinity of those very pricey, very delayed square feet in the very place he fought tooth and nail to keep his ex-wife from living, New York. And so Griffin is apparently content to wait patiently for the flashiest offices in all Manhattan and beyond, if not for world domination in investment banking.

While Citadel Securities waits for the ultra-luxury, 47-story tower to be completed, it is expanding its footprint at 350 Park Avenue, where it is close to signing a deal for about 120,000 square feet. The lease is expected to last roughly three years, giving the company time to continue to add staff there while work continues on 425 Park Avenue, about four blocks away.

Citadel Securities expands New York Footprint [Crain’s Chicago Business]

Citadel Securities has big expansion plans and has set its sights on prying open the trillion-dollar financial markets in China, the world's second-largest economy. If history is a lesson, working with the Chinese government won't be easy (witness recent U.S.-China trade tension), but it's likely to pay off, given that the Asia-Pacific region is already Citadel Securities' second-biggest market, behind the U.S.

There is, of course, another matter. It’s not coronavirus—Griffin and Ray Dalio have already fixed that for substantially less than $100 million. But it will cost $100 million—for a suitably magnificent place for Ken to rest his head.

For Citadel, it’s full speed ahead in China [Crain’s Chicago Business]
Citadel Securities Agrees to $97 Million Settlement in China [Bloomberg]

On the other hand, perhaps Slack’s IPO was a little too successful? And maybe some other tech unicorn IPOs, too? (Citadel Securities also managed Uber’s listing, which, it must be said, priced at the low end of its range and not 50% above it.) The SEC’s just wondering out loud here. In information-request form.

SEC enforcement staff have recently sent letters including one seeking information from electronic-trading firm Citadel Securities LLC related to how it opened Slack’s stock for trading on June 20 in the workplace-messaging app’s so-called direct listing, the people said. It also seeks information on other IPOs.

Regulators asked Citadel Securities and at least one other firm for messages such as emails sent just before the stocks opened for trading, as well as their policies for complying with NYSE rules, some of the people said.

SEC Probes Listings of Slack, Other Unicorns on NYSE Over Several Years [WSJ]
Ken Griffin has another money machine to rival hedge fund [Bloomberg]

Uber Technologies Inc. has chosen electronic-trading giant Citadel Securities LLC to manage its hotly anticipated initial public offering on the New York Stock Exchange, people familiar with the matter said.

That's definitely one way.

Bringing in Ken Griffin and his guys to handle this is definitely a way to make sure that as little goes as wrong as possible. Spotify chose Citadel as its DMM after its direct listing, and things are going pretty well over there.

In fact, using Citadel only makes sense considering that Citadel has made huge strides in the specialist game since it jumped in a few years ago. But that's to be expected considering that Ken Griffin is not a fan of mediocrity. The only thing we don't like about this partnership is that Travis Kalanick is no longer around to give us the gift of two performative nerd Alphas trying to get along when the CEO of Uber shakes hands with Ken Griffin.

Uber Chooses Citadel Securities to Handle Its IPO [WSJ]

Ken Griffin’s campaign to get the government to smash Wall Street’s banking behemoths into individually systemically unimportant little pieces is going nowhere. But that doesn’t mean the Citadel Investment Group chief doesn’t still have them in his sights. For the biggest trick Ken Griffin ever pulled was convincing them that he was inept at banking and would never pose a threat.

Remember Citadel Securities? Little I-banking biz Kenny G. launched almost a decade ago, right around the time he was also trying to start a functioning CDS clearinghouse, which effort went nowhere because the big banks didn’t want it to? Place that looked like a total clusterfuck because no one met K.G.’s exacting standards for a banking executive and which underwent several rounds of swingeing cuts amidst rumors that the jig was up?

Well that was all part of Ken’s plan to soften up the competition. Three years ago, Griffin revived Citadel Securities as part of a long, slow plan to beat the banks at their own game. And things remain very much on track.

The electronic market-maker has been a presence in inter-dealer Treasuries trading for more than a decade. Now it's deepening its reach into the client-to-dealer arena—a longtime bastion of Wall Street banks that's proven tough for newcomers to crack and makes up almost half of daily turnover….

“You can't hope to be fully relevant in Treasuries to a global client base—whether it is Japanese mega-banks, sovereign wealth funds, domestic asset managers or hedge funds, without being involved in the entire complex of securities,'' said Paul Hamill, global head of fixed income, currencies and commodities at Chicago-based Citadel Securities. “We're logically building this business up in layers and always knew we'd have to add all the off-the-runs….”

In the first quarter of last year, the firm entered the client-to-dealer market when it started trading with investors in benchmark Treasuries—the most recently issued, and most frequently traded, debt for a given maturity. In February of this year, it also began acting as a middleman for investors in older securities, known as off-the-runs. It focused on non-benchmark Treasuries through the sixth most recently issued offering. Now it will deal in all seasoned Treasuries, which change hands less frequently as most traders prefer using the newest maturities for directional bets….

Citadel Securities has another ambition in Treasuries—to eventually join the ranks of the Fed's primary dealers, and it anticipates that will take several years to achieve.

Citadel Securities ratchets up fight against big banks [Crain’s Chicago Business]

Ken Griffin’s investment banking unit, Citadel Securities, has not been synonymous with job security, especially at the very top. But Kevin Turner is never going to be CEO of Microsoft, so what the hell? Sure, he’ll take over the business, rebooted about two years ago after Ken Griffin fired almost everyone five years ago. And when KG starts methodically moving his milk froth from one cup to another, Turner will just walk back to his office and start putting things in boxes.

A top Microsoft executive, Kevin Turner, is leaving the company to join Citadel Securities as its new chief executive, continuing a wave of executive departures of technology industry leaders to financial firms.

Kevin Turner, Microsoft Executive, to Join Citadel Securities [NYT]