[JumpCrisscross]

> Citadel also bailed out Melvin fund for their short position in GME. So, Citadel has an interest in not letting the price go up any further.

Citadel bailed out Melvin Capital. Not its position. Melvin doesn't have a short position anymore.

Melvin made a stupid bet. Citadel bailed them out. Private sector bailouts aren't free: Citadel got its pound of flesh. Even if they bought the entire portfolio, that portfolio no longer includes GameStop shorts.

If Citadel's asset management and market making arms are colluding, that is illegal. But it's the most complicated and stupid explanation of the bunch. Market makers stop quoting for all kinds of reasons. If I were still on my options market making desk, I'd be pulling the plug on this. My traders would yell at me. This is what you make money on in market making! But the risks of loss go up with volatility, and the costs of gamma getting away can be nasty.

The chances that a fund the size of Citadel has any strong opinion on the direction of GameStop stock is vanishingly low. The chances that they stopped quoting in the name, as did almost every other market maker, and thereby broke Robinhood's system, which doesn't--to my knowledge--directly interface with exchanges to any significant degree, is high.

[jamilbk]

> Melvin doesn't have a short position anymore.

Source? If I was caught in a short squeeze, this is exactly the kind of announcement I would circulate to prevent the price from going any higher.

[raducu]

Citadel din't bail them out and they didn't close the positions, if they did, the "bailout" would be a complete writeoff -- why would Citadel do that?

Citadel probably gave them the cash to avoid a margin call, knowing they can later manipulate the market and the shorts would payoff in the end, and Citadel would get their share of the spoils.

Otherwise a bailout makes no economical sense, Citadel is not the FED, they can't print money just to cover someone elses losses.

[JumpCrisscross]

> if they did, the "bailout" would be a complete writeoff

What? No it wouldn't.

Melvin faced cash calls. To raise cash fast they could (a) get it from their LPs (fat chance), (b) raise it from someone else or (c) sell other assets. The last option is a fire sale. You figure out what the fire sale discount would be, say it's 50%, and then use that to get (b).

I don't know what the terms of the bailout were. If I were structuring, I'd make it a loan with a super-high interest rate triply collateralized by their remaining assets. If they pay it back, I get the super high interest rate. If they default, I get the rest of their assets for 33¢ on the dollar. Between those two, the latter is frankly the higher-payoff scenario. (I would also require all short positions be closed out within N days, with the borrower's investors bearing the losses.)

[raducu]

Are you saying that Citadel just lent someone money to close short positions worth a very significant percentage of their total assets? (Melvin having 11 bilion in total assets and Citadel giving them 3 billion).

That's what I was pointing out! Melvin did not close their shorts(as they said they did), they just got more rope from Citadel, and Citadel was willing to do just that knowing they can manipulate the market.

The narative of Melvin was "Citadel gave us 3 billion dollars, we closed our shorts at a loss, you won wsb, aren't you happy, you won, now leave us alone and stop buying".

[JumpCrisscross]

> Citadel just lent someone money to close short positions worth a very significant percentage of their total assets?

Yes. Those other assets are presumably uncorrelated to this short position. If they were fire sold, depending on the assets, they could have gotten 20¢ or 30¢ on the dollar.

That discount gives Melvin the incentive to borrow, even at exorbitant rates. It protects the rest of the portfolio. With the bailout, the GameStop loss is capped and eaten by LPs. That sucks. But it sucks less than eating that loss and selling off the rest of the portfolio for peanuts.

> Melvin did not close their shorts(as they said they did)

You're alleging securities fraud. This may be the case! But we have zero evidence of it. And if Citadel and Point72 invested $3bn to aid and abet securities fraud, that would be quite stupid.

[selectodude]

> You're alleging securities fraud.

I stare at this crap all day and I've seen no indicator that Melvin has closed a large percentage of their position, let alone all of it. I will 100 percent allege securities fraud.

[PicassoCTs]

They got away with worse in 2008?

[raducu]

Genuinely curios, what type of assets can only be liquidated 33 cents on the dollar?

And what is the likelyhood Melvin had such a significant proportion of their portfolio in such assets?

[sandworm101]

Junk bonds. Packages containing failed/failing mortgages. Unsecured medical debt.

[georgeecollins]

Good grief, can you imagine trying to sleep at night with a portfolio of unsecured medical debt? "Pay me for your cancer treatment!"

[ethbr0]

The type of assets that you need to sell in the next hour, of such a magnitude that there are only a few buyers.

[ric2b]

Think about it, you're staring at a mob of people willing to buy the stock at absurd prices... Why would you announce that you've closed your shorts instead of keeping quiet and profiting of the mob?

The answer is they didn't close it, they were trying to get the mob to back off.

And no, it technically wouldn't be fraud, they were very careful with their words...

[anonymouse008]

Here's the source --

Citadel, Point72 to Invest $2.75 Billion Into Melvin Capital Management - WSJ [0]

Read As: Melvin no longer has a short position. Citadel (edit: or like someone else said, a 3rd party) does. Citadel will handle this. Melvin is in time out.

We'll figure out who holds the chips in a few weeks time when filing deadlines are due. Thus it's dark.

Thus explains the perfectly executed short ladder today - could only be pulled off by someone with more dry powder than Melvin - but if you look at the Level II data, this is going to take a long, long time.

[0]https://www.wsj.com/articles/citadel-point72-to-invest-2-75-...

[JumpCrisscross]

> the perfectly executed short ladder today

I missed this. What's this referencing?

[dspig]

Selling back and forth at a lower and lower price while WSB couldn’t buy to keep the price up

[stainforth]

> while WSB couldn’t buy to keep the price up

Yes which could be called the crime of these brokers

[JumpCrisscross]

> If I was caught in a short squeeze, this is exactly the kind of announcement I would circulate to prevent the price from going any higher

That would be securities fraud.

[pc86]

Well surely that never happens. No large organization has ever committed securities fraud in order to make or save billions.

I hope you have a better reason why that's not likely than "but that's illegal." Them actively committing securities fraud seems to be the most likely occurrence from where I'm sitting.

[JumpCrisscross]

> No large organization has ever committed securities fraud in order to make or save billions.

Who would save billions? For how long?

Let's assume the statement is fraudulent. Before the statement was made, Melvin's LPs were set to get hosed. Melvin's general partners, the ones making the statements, have a lot of egg on their faces. But they didn't do anything wrong. They keep their money and houses and yachts. And in all likelihood, after a few months, craft a lessons-learned pitch and raise more money.

After the statement, they have engaged in fraud. Not only is criminal prosecution a risk. All those deep-pocketed LPs can now sue the general partners, personally, for breach of fiduciary duty.

Add to that the Citadel bailout, which removed the risk of the fund going under, and there is no reasonable explanation for lying about closing out the short. If you wanted to show resilience, you'd say something like "we've fully hedged our shorts with long-dated puts, reducing our expected profit but capping our losses."

[silexia]

This will probably be my least popular post ever, but the explanation needs to get out there for why Robinhood stopped trading on GME.

Selling a stock short is NOT illegal. It is a perfectly valid type of investment according to the SEC:

“D. Are short sales legal? Although the vast majority of short sales are legal, abusive short sale practices are illegal. For example, it is prohibited for any person to engage in a series of transactions in order to create actual or apparent active trading in a security or to depress the price of a security for the purpose of inducing the purchase or sale of the security by others. Thus, short sales effected to manipulate the price of a stock are prohibited.”

Basically – you can’t short sell a stock to manipulate the price down so you can buy a lot more of it later. If you believe a stock is overpriced and short sell it, that is legal. That is exactly what tons of retail traders and hedge funds do every day, including on Gamestop.

On the other hand, manipulating a stock price upwards to cause a short squeeze IS illegal according to the same SEC article:

“Although some short squeezes may occur naturally in the market, a scheme to manipulate the price or availability of stock in order to cause a short squeeze is illegal.”

Unprecedented numbers of people on Reddit, Twitter, and elsewhere collaborated to intentionally create a short squeeze on GME in the last week. No one talked about a fundamental case why Gamestop the company was worth a lot of money and would be successful in the future; instead everyone made the argument that due to a very high short interest of 100%+, that a short squeeze would send the price “to the moon”. That is illegal according to the SEC.

Multiple brokerages, especially Robinhood, probably had their attorneys tell them that “Hey, you are aiding and abetting illegal activity by enabling a short squeeze and could be liable criminally or civilly if you continue to allow this blatant illegal activity on your platform”. So they decided to stop it by only allowing people to close their positions rather than open new ones in support of the short squeeze.

Another strong reason is that if the short squeeze caused the GME stock to go to 5000 in a sudden leap, tons of traders (both retail and professional) could instantly go broke, and then the brokerage (Robinhood) would be left holding the bag. For example, picture a retail investor with a Robinhood account had sold call options in the amount of $100,000 and their account was worth $200,000. If the price gapped from 300 to 5000 and those options were exercised, that trader could have a loss of $10,000,000. He would lose the value of his account, $200,000… but the brokerage would have to make up the rest of the settlement and take a loss of $9,800,000. Now multiply that by thousands of accounts…. no brokerage wants to take the risk of being bankrupted, so they shut it down.

The two strong reasons Robinhood and other brokers stopped trading was to prevent legal liability from enabling illegal activity on their platform, and for wanting to avoid potentially massive banktuptcy from traders unable to cover their losses.

[DenverCode]

> No one talked about a fundamental case why Gamestop the company was worth a lot of money and would be successful in the future; instead everyone made the argument that due to a very high short interest of 100%+, that a short squeeze would send the price “to the moon”.

All of this started on Reddit because someone made a case for their fundamentals.

Here is their Reddit account: https://www.reddit.com/user/DeepFuckingValue/

Here is their YouTube account: https://www.youtube.com/c/RoaringKitty/videos

He is considered a legend by all of the people on WSB (of which I am not one) for it and kicked the whole thing off.

My question is.. how does a guy on Reddit and YouTube giving a fundamental analysis of why he valued a stock, and millions of people seeing value and buying it, differ from something akin to Mad Money?

[yowlingcat]

> Unprecedented numbers of people on Reddit, Twitter, and elsewhere collaborated to intentionally create a short squeeze on GME in the last week.

You're missing a party in that analysis. For this party, maybe it was a stupid idea for them to try and short sell in a market where the fed had pumped trillions into the economy and market activity, retail and otherwise, is at an unprecedented level of froth. But with that said, they are supposed to be professionals. It seems to be within reason to expect them to be able to hedge against the risk of a bunch of amateurs deciding to protest buy a piece of their childhood against being raided by Wall Street, no?

After all, "irrationally" holding assets that have sentimental value and allocating a large portion of whatever surplus earnings you have to it is a well known American tradition. Whatever the socioeconomic bracket, people have traditionally found ways to support causes and brands that they hold dear. Shouldn't large institutional clients be asking these fund managers why they're poking a beehive right now, and whether it might just be a little unnecessarily risky?

[NOGDP]

Robinhood has no stake in whether or not individual trader actions are legal, and the entire distinction between legal and illegal here is based on being able to determine individual trader's motives. Robinhood is acting illegally by your own argument by manipulating the price and availability of a stock.

[bigtunacan]

Basically there was a good fundamental analysis with due diligence that GameStop was over shorted and priced under value. Some people thought it was a good analysis and started buying. When more people buy... the price goes up.

As the price goes up more people started to believe the thesis and piled in. At some point this just becomes momentum training which last I knew was legal.

It seems like you have taken a very narrow and biased view of the law that fits the narrative you like.

[jdhzzz]

I found this interesting/believable https://tinyurl.com/y64hzsl6 on WSB concerning RH refusing additional buys of GME.

[tomjakubowski]

It's one thing to commit securities fraud. It's another to do it, blatantly and openly, as part of the biggest news story of the week.

[ric2b]

People panic.

Especially when they're staring at billions of losses and maybe all it takes to save them is a carefully worded public statement that they think they can later argue is technically truthful.

[unreal37]

To be clear, they didn't "announce" they closed their positions. They whispered it to a CNBC news anchor on the phone.

There's no announcement, just a sourced rumor, and no proof they closed their trades when they said they did.

[paxys]

Not if you ask one of your buddies at CNBC to announce it, and when caught they just say oops my bad, it was based on incorrect info.

[ZephyrBlu]

How have they exited their short position when the short interest is still ~130% though?

[majormajor]

The higher the price goes, the more incentive for new people to buy short, who aren't subject to the same pressure to get out fast that the ones who've been there longer were.

Doing this all in such a publicly-coordinated way on Reddit means you're wide open to people trying to directly play against your goals.

So much of the "proof" of things around this seems to be making big assumptions about who is on the other side that the aggregate numbers don't seem to indicate one way or another.

[JumpCrisscross]

> How have they exited their short position when the short interest is still ~130% though?

Lots of people are short? I know at least half a dozen people who bought puts over the last few days. Those puts hedge into shorting the same way calls turn into buying.

[ZephyrBlu]

Hmm. There seems to be a lot of unknowns right now. Do you think the information about how this all went down will come out once it's over?

I'd say most of the wallstreetbets traders still believe Melvin has their position, but you're saying otherwise. Though the still extremely high short interested doesn't seem to make sense if the big losers already exited...

[JumpCrisscross]

> Do you think the information about how this all went down will come out once it's over?

I do. This will make partners out of a solid suite of securities lawyers around the country. But we won't have clear answers for at least another 6 months.

[jsamps]

High short interests make a lot of sense right now, you have a shitty company with a market cap above 50% of the S and P 500 trading at multiples higher than IP rich tech companies like Apple. The stock is overvalued many times over regardless of whether you use sentiment or NPV’s. The more overpriced a stock becomes the more bears will join the marketplace, that’s inevitable. Most hedge funds take losses once the price goes about 30% over their position, most early bears definitely went above this but there is little chance they are still holding. That means that these new shorts are likely to have set prices in the $250 plus range, where the potential returns are astronomical and the little guys trying to stick it to the man are likely to foot the vast majority of the Bill whilst making the man and a small number of early buyers a shit load of money

[TechBro8615]

Do we have real time access to the short interest numbers? My impression is those came from a report that comes out every two weeks?

[ZephyrBlu]

Not real time, but theres this wallstreetbets post from yesterday.

https://www.reddit.com/r/wallstreetbets/comments/l642ms/upda...

[TechBro8615]

Posted before Melvin capital claimed they had closed their position?

[ryanSrich]

Yeah I don't buy this at all. There isn't enough stock for them to close their position.

[JumpCrisscross]

> There isn't enough stock for them to close their position

Tens of billions of dollars of GameStop have been bought and sold over the past few days. If you can buy GameStop to go long, you can buy it to cover a short.

Note that there isn't a limit on rehypothecation. A share sold short by Bob can be used by Anna to cover her pre-existing short.

[d1sxeyes]

I am not highly knowledgeable on this, but... even if it's the same share that Anna sold to Bob short in the first place?

[ric2b]

> Tens of billions of dollars of GameStop have been bought and sold over the past few days.

Yes, at prices that are several multiples above the price they shorted at.

[FabHK]

I don’t believe Melvin has public investors that could claim to have traded Melvin’s shares on the basis of Melvin’s misleading statements.

And I am quite certain that there is no obligation that you have to truthfully tell the world your position in any one security.

So, I’d like someone with legal training to make a case for security fraud.

(It might still be market manipulation or some such).

[alasdair_]

>That would be securities fraud.

Naked shorting to drive down the price is also securities fraud. And yet...

[Fredej]

Aren't we already discussing SEC violations here?

[monkpit]

Yeah, I don’t see how it being fraud leads to the conclusion that it’s not happening.

[ordinaryradical]

If the alternative is bankruptcy and the destruction of your legacy, would you risk it?

[metiscus]

If the penalty is less than the potential fine as has sometimes been the case, is that really that big of a deterrent?

[scsilver]

Seems like the most financially responsible move. And these guys are fiduciaries.

[franklampard]

> That would be securities fraud. Are you saying that they wouldn't commit securities fraud?

[piracy1]

Weather or not Melvin has the position, you can look at the borrow rates and short interest. Someone is balls deep in shorts and they have to cover one of these days.

[jb775]

Yeah I don't believe it. Or they transferred it to a complicit 3rd party who will eventually benefit.

[monoideism]

> The chances that a fund the size of Citadel has any strong opinion on the direction of GameStop stock is vanishingly low.

I find it exceedingly unlikely that Citadel has no opinion on the value of a stock that could make or break a firm they just lent massive amounts of money to.

It's also very unlikely that Melvin didn't have a short position anymore. I think that was a lie, knowing the SEC fine would be less than what they otherwise would lose. We'll see - maybe. Or maybe TPTB will cover this up.

[dehrmann]

> The chances that a fund the size of Citadel has any strong opinion on the direction of GameStop stock is vanishingly low

I didn't touch this in the first place, but once it was clear it was a short squeeze, nope, not gonna play that game. Just sit back and enjoy the show.

[jansan]

A short squeeze is nice if you get caught in in by accident as a stock owner. During the Volkswagen short squeeze a lot of lower level employees at Volkswagen were suddenly able to fully pay back their mortgage. Isn't that cute?

[hinkley]

I doubt many gamestop employees got to do that this week, but there was a similar, smaller drama also going on with a Blackberry short squeeze, and that might have gotten a few extra mortgage payments taken care of.

[macromaniac]

>Melvin doesn't have a short position anymore.

This makes no sense, if gme isn't shorted then why then break the law and restrict buying it?

And it does feel like they are restricting buys. Seems unlikely that all the trading platforms that rely on citadel coincidentally decided they wanted to hedge against volatility by restricting user buys.

[macromaniac]

I am ashamed to have written this comment. I didn't know about clearing houses and shouldn't have been so arrogant in a field I'm not familiar with. Funnily enough I put my money where my mouth was and profited, but that was just luck. Whatever.

[6nf]

> Melvin doesn't have a short position anymore.

Untrue, the number of shares short is still 70 million. Nothing changed.

[girvo]

They aren’t the only people with short positions. They could’ve exited and others picked it up.

I’ve no dog in this race; just thought I should point that out

[nowherebeen]

The question is, would there be any consequence if he lied about it? Given the huge amount of losses, it’s not unreasonable for one to lied about closing their position in hopes of the price falling down.

[znpy]

I wonder... couldn't people do this over and over again?

how long can citadel and/or other entities hold?

[arminiusreturns]

No, or rather, only if MM's like Citadel over-short like they did here. It's a rare catch by retail that they were overextended, and retail pounced on the opportunity, just like the MM's do against retail all the fucking time, but now that the little guys are doing the fucking, it's all fetch me my smelling salts and call the sheriff!

[whimsicalism]

Retail didn't do jack to the market makers and Melvin capital isn't a market maker.

So many people here who have no idea what the hell is going on, and yet are so confident.

[arminiusreturns]

Melvin capital is a market maker, it's in the list at least... You might check yourself before acting so high and mighty. 1 is the reference for wikipedia. 2 is just another source in case you doubt. By the way, Citadel is also on that list. Retail did do something to Citadel and Melvin... so wrong on both counts.

1. https://web.archive.org/web/20070228050751/http://www.alphat...

2. https://www.level2stockquotes.com/market-makers-m-list.html

[whimsicalism]

Melvin securities is a completely different company than Melvin capital.

Retail did nothing to Citadel securities.

[arminiusreturns]

Welp I guess I can eat crow on this one then. You are right it seems.

[whateveracct]

This entire GME WSB thing is a bunch of people wanting to feel important. That's why there's so much high-and-mighty talk even though the facts of the matter are..pretty boring.

[intended]

The facts are supremely boring. Fund gets caught with bad luck. Fund blows up. Life goes on.

Even the amount of billions being transferred here are not interesting.

[ric2b]

It stops being boring when brokers start directly interfering with the volume by changing what traders are allowed to do in the middle of a trading day.

[arminiusreturns]

I'd say this is a vast oversimplification of the situation, don't you agree?

[KMag]

Citadel is probably having a very busy, but very good day today.

[einrealist]

I wonder whether Citadel was the / a major lender for the shares in the first place. That would explain a lot. But even then, I doubt that there was foul play.

[AndrewBissell]

I certainly get pulling the plug on options, but I don't understand how the volatility in $GME would lead a market maker to simply stop quoting the underlying stock altogether. If the price starts flying around you just widen your spread. If there's too much pressure on the buy side and you can't keep your position neutral, you just raise your offering price until you're not selling shares at too fast a rate anymore.

[JumpCrisscross]

> I don't understand how the volatility in $GME would lead a market maker to simply stop quoting the underlying stock altogether. If the price starts flying around you just widen your spread.

People after the financial crisis liked to talk about fat tails. Risk models assuming narrow tails, reality having a taste for extreme events. This is a fat-tail event. We don't have great models for stocks as volatile and as correlated as GME is right now. Which means for even cash equities trading, we don't have a great sense around what the appropriate spread should be.

Market making has sometimes been described as vacuuming up nickels in front of bulldozers. These are bulldozin' times. You don't want to fill a bunch of sell orders in GME right before it gaps down 80%.

[AndrewBissell]

I mean, we can see that this idea that the stock is too risky to quote is not true because there is a two-sided market in it right now, which can be traded on multiple platforms. The only actually existing peculiarity here is that Robinhood is not allowing customers in possession of 100% margin to open a new long position.

[JumpCrisscross]

> we can see that this idea that the stock is too risky to quote is not true because there is a two-sided market in it right now

On exchanges. Those are buyers and sellers as well as market makers. Robinhood connects to a subset of the latter.

[whimsicalism]

> Those are buyers and sellers as well as market makers.

Nope, pretty much just market makers.

[whimsicalism]

Hopefully others realize that downvotes on HN do not change the reality of how market makers function.

[treis]

Today it opened at $265, hit a high of $483 and dropped to a low of $112. At 2:00 pm it was $226, 2:05pm it was $431, and then came back down to $237 at 2:15pm. That sort of volatility is, I think, unprecedented which means the market makers don't have good risk models. So you're right that they could be cleaning up here with a large spread. But that profit comes at unknown levels of risk.

[dcolkitt]

An internalizer must match displayed NBBO at the exchanges. If it can’t, it has to route to the exchange, pay exchange fees, and on top of that still pay for the order flow.

Normally internalizers have no problem competing with spreads on the exchanges, because retail flow is much less toxic than the sophisticated traders in the public venues. But with GME, the retail investors are running the show.

Therefore it no longer makes sense for internalizers to pay for this order flow.

[cameldrv]

I don't think it's an issue of Citadel not quoting GME. In my understanding, Robin Hood is allowing purchases to close a short position, so there exist quoted prices, they just don't want people expanding a long position.

If this is coming from Robin Hood, they could make the (very weak) argument that they are protecting their retail customers from themselves, but if it's coming from Citadel, it just looks like market manipulation to me.

[jodrellblank]

I don't think it's coming from RobinHood; eToro is also blocking buys and they have the message "We have made this change following a notification from our liquidity provider that they have set $GME to close only status".

[andoriyu]

I got similar email from tasty. They said Apex clearing won't allow any new positions on meme stocks.

Given that it's not just RH, but nearly all, if not all, brokers that outsource order flow like RH...I think it's safe to assume it wasn't RH decision.

[whimsicalism]

You're making assumptions that it was the liquidity provider who pulled the plug and not the much more likely option that it was Robinhood pulling the plug for liability reasons.

[kosh2]

Tastytrade also restricted trade in the same manner. They send a mail to all customers and made it very clear that it was Apex Clearing who forced their hand. It is very unlikely that something different happened at Robinhood.

[AndrewBissell]

No, I'm granting that as the parent's premise. And what liability reasons would Robinhood have to disallow buying an NYSE listed stock with 100% cash?

[whimsicalism]

They've already been sued by retail investors who have lost their cash in the past and courts have already shown themselves to be somewhat partial to "the gamified interface just made me spend $1k I could barely afford because it was so fun!" arguments that RH is liable.

This is a much bigger deal, some (not hedge fund!) people are going to lose a crapton of money on it, and people are probably going to sue them once that happens.

You can see this discussed elsewhere in the thread.

[ROARosen]

> for liability reasons

For trying to get some positive media coverage, after being constantly bashed and blamed by them for the uneducated retail trader boom.

[totalZero]

Market makers on exchanges generally have a contractual uptime obligation if I am not mistaken, but I'm not sure that applies when talking about payment for order flow.

[Red_Leaves_Flyy]

Gme has been freezing up for a few seconds to fifteen minutes at a time for days now. Sounds like a breach to me, unless someone else ordered a halt. Robinhood itself was responsive, as were other stocks.

[selectodude]

Those are due to exchange LULD halts. Not brokerages.

[deeeeplearning]

>Melvin doesn't have a short position anymore.

That's not at all verified. Short interest is still well over 100% of float. The only thing you are going off is a poorly sourced CNBC report with wishy washy language from Plotkin.

[bigtunacan]

Citadel is blocking trades on these stocks where Melvin Capital holds shorts for any platform that uses them; Robinhood is just the most prominant among small retail traders.

Citadel "bailed out Melvin Capital" because Citadel essentially owns Melvin and so their loss is our loss sort of situation. Melvin Capital stated they had closed out their short position on GameStop, but those are huge losses to cover no one knows how true that is. There is a lot of rumor that Citadel/Melvin Capital re-bought short positions yesterday before Citadel restricted trades to manipulate the market. If this is true it is highly illegal, but this effectively allow Citadel/Melvin to make back their losses if they can force market prices down.

TL/DR, Citadel/Melvin are breaking the law, all the retail traders are getting fucked, but when this is done Citadel/Melvin ends up having more cash than ever.