Newly elected Senator John Hickenlooper officially hired banking lobbyist Kirtan Mehta as his Chief of Staff.
Mehta most recently served as public policy counsel for the online brokerage Robinhood. He previously worked with the American Bankers Association (ABA) and West Virginia Senator Joe Manchin.
Mehta’s deep connection to K Street and big banks was problematic enough for Hickenlooper considering the former governor hypocritically railed against corporate political influence on the campaign trail.
However, new controversy on Wall Street this week surrounding Robinhood’s questionable business model makes Mehta’s hire appear even more swampy.
Robinhood is a commission-free online brokerage that has become popular among millennials in recent years.
Critics argue Robinhood unethically “game-ifies” investing by enticing young traders to take irresponsible risks.
Mehta’s stint with Robinhood coincided with several investigations into the firm’s business practices by the Securities & Exchange Commission (SEC).
In lieu of commissions or fees for users, Robinhood sells its customer order flows to third party trading firms.
Protecting third party order flow sales from legislative threats was surely a key priority for Robinhood when they hired Mehta in 2019.
In December the company paid a $65 million fine to settle charges it misled its customers about this practice.
Robinhood’s suspect business model generated fresh scrutiny in D.C. this week after the company created a firestorm by suspending trading of GameStop stock.
I Won’t Rest Till The People Responsible For Today Are Behind Bars pic.twitter.com/tlbHD4TPQ0
— Dave Portnoy (@stoolpresidente) January 29, 2021
GameStop, a struggling mall-based video game retailer, was in the midst of a historic short-squeeze ignited by Robinhood day-traders.
The suspension drew bipartisan backlash as the trading freeze sent GameStop shares plummeting, generating untold losses for Robinhood retail investors.
Fully agree. 👇 https://t.co/rW38zfLYGh
— Ted Cruz (@tedcruz) January 28, 2021
Robinhood framed their GameStop freeze as a way to “help our customers navigate this uncertainty,” but experts blamed the upheaval on the company’s practice of selling order flow data to third parties.
“This is a big problem of the e-brokers’ own making as they are so beholden to their payment for order flow overlords and shows the real fragility of the zero commission business model,” said Timothy Welsh, founder and CEO of wealth management consulting firm Nexus Strategy.
Taking payments for order flow from Wall Street firms is a controversial, but legal practice done by most electronic brokers. For Robinhood, it’s the biggest revenue source.
Others speculated Robinhood may have received external pressure to halt GameStop shares from the third party firms that purchase Robinhood’s order flow data.
Either way, this entire situation looks absolutely awful for Robinhood.
It also will have severe political ramifications for Hickenlooper, who can’t exactly complain about special interests rigging the system when his top aide was a lobbyist for the most predatory retail brokerage on Wall Street.