Ken Griffin’s Citadel Securities gets a $1.15 billion infusion

Chicago billionaire Ken Griffin’s global market-making firm, Citadel Securities, said Tuesday it’s received $1.15 billion for minority stakes, its first outside investment and ones that could lead it deeper into cryptocurrency trading.

The firm said it has sold stakes to Sequoia Capital and Paradigm in a deal that values Citadel Securities at about $22 billion. It said Sequoia partner Alfred Lin will join its board.

Citadel Securities deals in a range of assets for brokerages and large institutions, reporting that it touches 27% of the trading volume for all U.S. equities. The business is separate from Griffin’s Citadel hedge fund, which has reported $43 billion in assets and is one of the world’s largest.

Griffin, chairman of Citadel Securities, said the investment will help his firm expand. “In Sequoia and Paradigm, we have partners that appreciate how the strength of our market expertise, advanced predictive analytics and superlative software engineering can redefine an industry,” Griffin said in a news release.

Citadel Securities CEO Peng Zhao pointed to Sequoia’s track record, with early investments in Apple, Google, Airbnb and other startups. “Many companies that have transformed the world have achieved their highest ambitions with Sequoia as their partner,” Zhao said. “As technological innovation in financial markets becomes only more important, we see enormous opportunities to meet the needs of our clients across more markets and more products.”

Sequoia invests mostly on behalf of nonprofits and schools and emphasizes that it supports just a few “daring” founders each year. Paradigm is active in crypto companies and what’s known as Web3, or a new vision of the internet whose backers contend could provide better security and privacy.

Griffin has been a prominent skeptic of cryptocurrencies. A spokesperson said he was unavailable for an interview.

The outside investment could lay the groundwork for an initial public offering of Citadel Securities, but the firm has not said it plans to pursue one.

Griffin’s partnership with Sequoia aligns him with an investor in Robinhood, the digital brokerage that helped make stock trading a craze early in the pandemic, leading to wild gyrations in the price of “meme” stocks such as GameStop. Individual investors active on social media have accused Citadel Securities and Sequoia of forcing Robinhood to restrict trading in meme stocks to protect business interests. Both companies have denied that and a subsequent report by the Securities and Exchange Commission found no evidence of collusion.

Citadel Securities does business with Robinhood and, in a practice that’s gotten regulatory scrutiny, pays it and other brokerages for their business. Critics argue so-called “payment for order flow” can disadvantage small investors and create conflicts of interest. But it’s also given brokerages room to reduce commissions to zero on most stock trades.

“Citadel Securities has carved out a unique place in the financial markets through its ability to absorb and price risk using techniques and capabilities from far outside the traditional world of Wall Street,” Sequoia’s Lin said. “Citadel Securities’ commitment to solving for the needs of its clients through advanced analytics and technology has helped make markets more accessible for millions of people.”

Forbes estimates Griffin’s personal wealth at $21.3 billion.