Ken Griffin, financial prodigy turned industrial giant

Nearly four decades ago, the South Florida Sun-Sentinel profiled three precocious members of the computer club at Boca Raton Community High School. While their classmates were shooting hoops, the “hard-drive trio” prepared for a problem-solving contest with other Palm Beach geeks later that month.

It’s unclear what happened with Satish Vadapalli and Wayne Wong, who went through the challenges with pen and paper before passing on solutions for their third member to run into a computer. But the latter was to leave a major mark on the financial world.

Kenneth Cordele Griffin is now one of the richest people in the world, with a fortune estimated at $26.5 billion by Forbes. He is best known for running his $40 billion Chicago-based Citadel hedge fund. But in reality, his lesser-known but arguably more prominent IT trading firm, Citadel Securities, is now the biggest key to his wealth — and growing controversy.

This week, Griffin sold a $1.15 billion stake in Citadel Securities to venture capital firms Sequoia Capital and Paradigm, electrifying the financial industry. The firm is the world’s largest algorithmic “market maker”, managing more than a quarter of all US stocks bought and sold every day. Now he’s eyeing cryptocurrencies and a likely initial public offering.

The deal valued Citadel Securities at $22 billion, adding $5 billion to Griffin’s net worth and raising him to 26 in Forbes’ list of the richest Americans. Many financial colleagues were in turmoil over the case.

“What made Michael Jordan Michael Jordan is not just that he jumps higher and runs faster, he is sui generis. Ken is similar in his field,” says Lloyd Blankfein, former chief executive of Goldman Sachs and Griffin’s friend. “He’s a great trader, but he’s also a great businessman, and those things don’t often go together. He’s like a runner who wins both the 100m and the marathon.

Nevertheless, Griffin has also become an anger magnet. For some, he embodies the financial industry and its supposed evils. In Chicago, his political machinations make people cringe. Conspiratorial retail investors on internet forums such as WallStreetBets describe him as the malevolent leader of an evil financial empire, even though the US financial watchdog has denied their claims.

Internally, Griffin is more respected than loved, and the culture would be brutally intense, even for Wall Street.

“There’s not a lot of empathy,” a former employee told the FT last year. “That can be an asset when things get crazy, because I don’t think he feels stress the same way everyone else does. There’s just this desire to be the best at everything, and everyone help him achieve it or not.

In an FT interview last year filled with long pauses and fully formed cut sentences in which he speaks, Griffin ignored such complaints: “If you’re wired to enjoy being a good competitor, you love working here.” , did he declare.

There were a few hints of Griffin’s commanding drive in the Sun-Sentinel profile. The 17-year-old – captured in glasses, a disheveled striped shirt and a classic zip-up Adidas jacket – was already a prodigy back then.

Active in the computer club, he was also president of the math club and budding entrepreneur. The middle-class teenager had started a mail-order software company selling educational programs to college professors away from home, allowing him to hide his youth from customers.

His first dalliance with finance came in 1980, when 11-year-old Griffin wrote a school paper about how he planned to study the stock market. Yet it was as an undergrad at Harvard that he began to trade aggressively, convincing his dorm to let him install a satellite dish so he could get up-to-date stock prices.

The dish was installed just in time for the Black Monday crash of 1987, when Griffin was already managing $265,000. Luckily, he was betting on falling stocks and made a killing. Griffin’s returns caught the eye of hedge fund pioneer Frank Meyer, who funded Citadel’s launch.

In 2001, Institutional Investor declared him the “wonder boy” of his industry. “Griffin is to hedge funds what pimply-faced dotcom billionaires were briefly to the internet: the god boy, the do-gooder nerd, the self-taught polymath of finance,” he wrote. A few years later, everything almost collapsed.

Despite its reputation for avoiding mistakes, Citadel lost $8 billion in the financial crisis. He was eventually forced to freeze investor withdrawals, often a death knell.

Instead, Griffin resurrected Citadel as one of the undisputed giants of the hedge fund world, created its high-frequency trading arm as Citadel Securities, and built it into a formidable company in its own right. In 2020, Citadel ranked fourth on the list of the most profitable funds of all time, with cumulative gains for investors of around $42 billion, while Citadel Securities reaped profits from the retail boom.

There are few signs that Griffin is particularly concerned about the opprobrium of Internet forums. When thousands of cryptocurrency enthusiasts raised over $40 million to buy a rare first-edition copy of the US Constitution last year, it outbid on a whim, sparking outrage. The winning bid of $43.2 million represented less than three days of trading revenue from Citadel Securities.

“2008 almost brought him down and he rebuilt himself like a magician. It’s phenomenal,” said a hedge fund executive. “He’s kind of like the Elon Musk of money.”

[email protected]

Comments are closed.