Last year, Robinhood and GameStop took Wall Street on a wild ride and the side effects are still being felt.
In short, retail traders banded together through Reddit and decided to invest in GameStop in order to make money and troll the large hedge funds. This bloated the GameStop stock and caused top financial firms to lose billions of dollars, since they had bet against GameStop’s stock, the Associated Press reported.
Robinhood, an app used for amateur trading, got dragged into the fiasco since the traders used it to buy GameStop’s shares and inflate the stock. In the midst of the flurry, though, Robinhood suspended trading, Protocol reported.
In the aftermath, Congressional leaders called for an investigation into Robinhood.
Republican Sen. Ted Cruz, New York Rep. Alexandria Ocasio-Cortez, and Sen. Richard Blumenthal of Connecticut were among the congressmen calling for an investigation into Robinhood’s practices.
However, it has been discovered that Blumenthal and his wife sold between $1,265,000 and $2,550,000 worth of shares of Robinhood in the last quarter of 2021, the Washington Free Beacon reported.
So while he was calling for an investigation into the trading app, Blumenthal was simultaneously making money from his shares in the company.
According to financial disclosures, a limited liability corporation — the Malkin fund, which is overseen by Blumenthal’s in-laws — bought and then sold shares of Robinhood on behalf of Blumenthal’s wife in February, October, November and December 2021, the Daily Caller reported.
These trades came to light because Blumenthal failed to report the December trades in a timely fashion. This is an apparent violation of the 2012 Stop Trading on Congressional Knowledge Act, which is a federal law that mandates lawmakers to report financial activities and trades.
Congressional lawmakers like Blumenthal have been under extraordinary scrutiny concerning trades and finances since dozens of congressmen were found violating the STOCK Act.
In January, Insider reported that at least 55 members of Congress had failed to properly report their financial trades.
In response to these violations of the STOCK Act, Speaker of the House Nancy Pelosi announced that Democrats were looking into potential laws that could ban lawmakers from stock trading, CNN reported.
“We’ve tasked the House Administration Committee to review the options that members are putting forth,” Pelosi said. “We’ll go forward with what the consensus is.”
This comes amidst a bipartisan push in Congress to ban lawmakers from trading while in office, since there is the natural risk of insider trading.
Already in January, Pelosi asked the House Administration Committee to consider enforcing higher fees and restrictions for congress members and aides who violate the STOCK Act.
“We have to tighten the fines on those who violate the STOCK Act. It is not sufficient to deter behavior,” Pelosi said.
In the midst of this fight to eliminate conflicts of interest and insider trading, Blumenthal appears to have a very clear conflict of interest by not reporting his sales of the Robinhood stock in time.
“The Blumenthals sold between $265,000 and $550,000 worth of Robinhood shares on Dec. 8 but did not disclose it until 56 days later, on Feb. 2,” the Washington Free Beacon reported.
It is possible that Blumenthal was entirely unaware of his trades and shares in Robinhood, however.
According to The Free Beacon, “A spokeswoman previously told the Washington Free Beacon that the senator is not always aware of trades made through the Malkin family investments.”