US lawmakers, a merchant named Keith Gill, and chief executives of Reddit and Robinhood, are preparing to question their role in the GameStop frenzy at a congress session this week. But some have another concern: whether China is involved.
Several Republican lawmakers on the House of Representatives Financial Services Committee plan to examine Reddit’s ties to Chinese tech firm Tencent and Robinhood rival Moomoo, according to a Politico report. Moomoo is a wholly owned subsidiary of Futu Holdings, also supported by Tencent.
These Republicans are reportedly concerned about possible manipulations by Chinese companies through the GameStop shares trading application Robinhood and some Reddit log traders.
It is unclear why these lawmakers wanted to investigate these Chinese companies and what specific questions they plan to ask at the hearing held on Thursday, Representative Maxine Waters (D-Calif.) Said. chairs the committee.
However, the GameStop trial comes at a time when techno nationalism is on the rise in the US and China. Policy makers have imposed – or tried to impose, restrictions that accelerate the separation of digital platforms, supply chains, and information networks.
“We live in an era of increasing competition between Chinese technology and so-called western technology,” said James Cooper, deputy dean of the California Western School of Law, who serves as a consultant to the US State Department and advises on emerging technologies. .
He said it was “political theater” to investigate whether malicious Chinese actors were manipulating GameStop’s price. Tencent and Moomoo did not respond to requests for comment as of press time.
Political theater aside, there may be several reasons these lawmakers look to China. One of them is the willingness of Chinese retail investors to enter the GameStop stock frenzy. The other is the continued influence of China’s trade practices in the US.
China has 167 million retail investors holding over 28.5% (about $ 200 billion) of the total market value of the Chinese stock exchange. Chinese retail investors can buy and sell their GameStop shares through Chinese online brokerage platforms with US broker licenses such as Moomoo and Webull. In the US, Robinhood’s biggest competitors, Moomoo and Webull, were founded by former employees of Tencent and Alibaba, respectively.
Webull was the second most popular app in the US at a time when online brokers were restricted from purchasing GameStop and AMC Entertainment stocks. While Robinhood grappled with the backlash caused by trade restrictions, both Webull and Moomoo have become alternative platforms for retail investors.
Webull began offering trading services for cryptocurrencies in 2020. More than 2 million users last year saw a ten-fold increase in brokerage customers. While the current user base is pale compared to Robinhood’s 13 million, Webull said it robbed users from its competitor, according to a report published by Bloomberg Businessweek.
Read more: TikTok and America’s Great Firewall
Retail investors seemed to have turned to Webull after Robinhood stopped trading certain stocks pumped by the Reddit group, including GameStop. However, Webull then stopped such transactions and told the clearinghouse to stop opening new positions on certain stocks.
Lawmakers’ concerns about Reddit’s ties to Tencent may stem from the $ 300 million Series D funding round in February 2019, when the Chinese company invested $ 150 million as the leading investor.
Tencent’s funding soon received criticism from Reddit’s users who prioritized privacy and rejected censorship. However, some analysts believe that Tencent is unlikely to control content on the platform.
San Francisco-based Moomoo is part of Futu Inc.’s efforts to expand its business in the US above Futu’s success in mainland China. Founded in 2012 by Hua Li, one of Tencent’s first employees, Futu is one of the largest online brokerage platforms in China, allowing retail users in mainland China to buy and sell stocks listed in Hong Kong and the US.
Futu Inc. is a registered broker-seller with the U.S. Securities and Exchange Commission and is a member of the Finance Industry Regulatory Authority and the Securities Insurance Protection Authority (SIPC), according to a statement on its website.
Futu won one of the largest Asian IPOs of 2019 on Nasdaq and aims to become a major player in online brokerage services for retail investors worldwide.
According to the Securities and Exchange Commission dated April 27, 2020, Li owns 40.2% of Futu’s equity with more than 71% voting power, while Tencent owns 30.3% of the firm’s shares with 26.2% voting power. .
Webull is a subsidiary of Fumi Technology, founded in 2016 by Alibaba alum Anquan Wang in Hunan, China.
According to a Bloomberg report, Webull adheres to the same regulations as other US brokerage firms and stores user data locally in an office down in Manhattan.
Webull voluntarily requested a review of its ownership by the Foreign Investment Committee (Cfius) in the United States, a panel that tends to prevent some Chinese companies from expanding in the US for national security reasons, Anthony Denier, the firm’s managing director, said in the report.