Robinhood’s C.E.O. Is in the Hot Seat

SAN FRANCISCO — Vlad Tenev, the chief executive of the online brokerage Robinhood, has had practice doing damage control.

Last March, he told customers that “we owe it to you to do better” after Robinhood’s app suffered lengthy outages, leaving many people unable to trade.

In June, he wrote in a blog post that he was “personally devastated” and wanted to improve the “customer experience” after a 20-year-old who had a negative $730,000 balance on the app killed himself.

And in December, when federal regulators fined his company $65 million for misleading users about how it made money, he said the accusations “don’t reflect Robinhood today.”

Mr. Tenev, 33, is now in the hot seat again after Robinhood abruptly curtailed its customers’ trading last week amid a frenzy in stocks such as GameStop, which were driven sky-high by an army of online investors. The limits infuriated Robinhood’s users, who were locked out of the action, and the seven-year-old start-up was blasted by lawmakers and others, accused of acting unfairly toward ordinary investors.

For days, Robinhood was slow to fully explain why it had curbed people from trading the stocks. Only later did Mr. Tenev disclose that Robinhood had put in restrictions because it did not have enough of a cash cushion to hedge against the risky trades. To increase that cushion and avoid further problems, Robinhood last week raised an emergency $1 billion, followed by an additional $2.4 billion this week.

On Sunday, Mr. Tenev told Elon Musk in an impromptu interview on the online conversation app Clubhouse that he knew that Robinhood’s trading curbs were “a bad outcome for customers.” He said the entire experience had been challenging, “but we had no choice in this case.”

It was no surprise that Robinhood got caught unawares over the past week, current and former Robinhood employees and analysts said. While Mr. Tenev has helped revolutionize online trading for a younger generation with an app that makes investing easy and fun, his start-up has repeatedly been ill-prepared to deal with issues as commonplace as technology glitches and trading hiccups, they said.

Many start-ups go through growing pains. But “there’s a consistent pattern which makes one question whether he knows what is going on inside his company,” Vijay Raghavan, an analyst at Forrester Research who covers Robinhood and other brokers, said of Mr. Tenev.

Lawmakers and some of Robinhood’s users have been even harsher on the chief executive. Representative Alexandria Ocasio-Cortez, Democrat of New York, and Senator Ted Cruz, Republican of Texas, have slammed Robinhood for freezing users’ ability to buy GameStop stock. Mr. Tenev has agreed to testify about the issue in Congress on Feb. 18.

GameStop vs. Wall Street

Let Us Help You Understand

    • Shares in GameStop, the video game retailer, have soared because amateur investors, starting on Reddit, have bet heavily on shares of the company.
    • The wave gained momentum in response to large hedge funds short selling GameStop stock — basically they were betting against the company’s success.
    • The sudden demand has driven up the share price from less than $20 in December to around $300 on Monday. On paper, anyway.
    • It’s not just GameStop. Amateur investors have backed other companies that many big investors had shunned, such as AMC and BlackBerry.
    • This bubble around GameStop forced big investors to raise money to cover their losses, or dump shares of other companies.

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