Griffin’s crypto hub? Citadel Securities to Raise $ 1.15 Billion from Outside Investors, Including Cryptocurrency Fund

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In what is perhaps the clearest sign yet that Robinhood is suffering from a huge decline in business (and revenue), the company’s de facto HoldCo firm, Citadel Securities, is expected to receive its first outside investment. in a transaction valuing the majority of the e-commerce company. owned by hedge fund billionaire Ken Griffin at around $ 22 billion, according to the WSJ.

We are proud to announce that Sequoia and Paradigm have made a minority investment of $ 1.15 billion in our business. https://t.co/EIbWKduS1h

– Citadel Securities (@citsecurities) January 11, 2022

What is remarkable is not only that this was Citadel’s very first outside investment, but that in addition to the former venture capital firm Sequoia Capital, the co-investor in the financing of 1 Citadel’s $ 15 billion cryptocurrency investor is Paradigm (although most of the cash appears to come from Sequoia whose partner Alfred Lin will join the Citadel Securities board).

The deal, the company says, will give Citadel Securities the capital it needs to continue to grow globally and could be the precursor to an initial public offering for the company. The big question, of course, is whether this is also a pivot for Citadel Securities to fully internalize crypto trading and break away from Robinhood which after a brief explosion in Dogecoin-inspired trading the year last, saw its value as the Citadel retail “feeder fund collapse.”

Citadel Securities, as readers are well aware, is a separate and separately managed entity from Citadel (although one wonders how much of a Chinese wall exists between the two divisions), the $ 43 billion hedge fund on which Griffin built his fortune estimated by Forbes at $ 21.3 billion. Founded in 2002, Citadel Securities has grown into a global giant that trades stocks, options, futures, bonds and other assets, managing around 27% of the stocks that change hands in the US stock market every day. Much of that volume comes from processing transactions for online brokerage houses such as Robinhood Markets, which has also helped familiarize Citadel with the dynamics of retail crypto trading, which it may now be looking to capitalize on. by eliminating intermediaries.

Citadel Securities is best known for being accused of organizing the January 28, 2021 trade restrictions in which brokerage firms limited the ability of clients to purchase GameStop and a number of other stocks. Citadel Securities has denied any role in the trade restrictions, which caused a huge rally in stocks even. Yet, as the WSJ notes, the episode fueled regulatory scrutiny of the company and its business practices. SEC Chairman Gary Gensler pioneered the idea of ​​prohibiting payment for order flow, the practice whereby trading companies pay brokerage houses such as Robinhood and TD Ameritrade to process orders from their clients.

Citadel Securities paid more than $ 1.1 billion for the order flow in the first nine months of 2021, making it the largest source of these payments. If PFOF is banned, Citadel will have to sever its relationship with Robinhood, which is why it may be looking to move crypto trading activity entirely internally and this is why it is taking capital from a crypto-linked fund. -cash.

While Sequoia is one of the nation’s largest venture capital firms with around $ 80 billion under management and has backed companies like Airbnb and Google before they went public, Paradigm is strictly focusing on cryptography and Web3, a reinvention of the Internet, areas into which Citadel Securities is likely to enter in the future as they become more regulated.

Griffin has been a crypto-skeptic to date and has avoided trading digital currencies in his businesses, but it looks like that is about to change.

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