The last few days I’ve been trying to wrap my partially functioning brain around why Steve Cohen and Citadel gave a combined $2.75 billion to Melvin Capital to keep them from going bankrupt due to their GameStop short bet. After hearing Marc Cohodes say the same thing on the Dave Portnoy Show yesterday, I’m now really scratching my head.
I did some intensive research (thanks Wikipedia) on Gabriel Plotkin, the founder of Melvin Capital. Surprise surprise, Plotkin has worked for both Citadel and SAC Capital, Steve Cohen’s former hedge fund that was shut down due to insider trading.
Plotkin was a “star” at SAC Capital and was never convicted of insider trading, but did receive emails that contained insider information. These same emails convicted a co-worker. Certainly, Plotkin likely knew what was going on a SAC Capital with insider trading and clearly did a good job of keeping his mouth shut to keep himself and his boss out of jail.
So after some incredibly intense big brain time and several rolls of tin foil, I have some half-baked thoughts on why these guys bailed out Plotkin:
- Plotkin made both Citadel and Steve Cohen a good amount of coin over the years and they bailed him out because they are pals. All these guys are greedier than greedy, so putting a few billion into a sinking ship to save a pal is probably unlikely.
- Some heavy hitters put tremendous pressure on both Citadel and Cohen to save their boy from collapse to prevent a run on hedge funds and possibly the entire financial system. I’d say there is a pretty good chance this went down. You think $2 trillion AUM Goldman is going to let some pissant $12 billion hedge fund wreck their gravy train?
- Tin foil hat time: It’s possible Plotkin has some decent dirt on the nefarious activities of both Citadel and Cohen from working at both funds and being well-connected in the industry. Perhaps Plotkin was bailed out by Citadel and Cohen to have him continue to keep his trap shut during the impending government investigation that is likely coming from this entire GME fiasco. These guys are all scum and would sell their own mothers to make a few billion, so I wouldn’t put it past them to do this.
Do I have any firsthand information as to what happened? No. Do I have a partially smooth brain that can put 2 and 2 together to know something fishy is up? Yes.