Robinhood Stock Trading App Sued

robinhood

Stock-trading app Robinhood now faces a class-action lawsuit after it blocked stock purchases of GameStop and other companies favored by Reddit’s WallStreetBets community on Thursday morning.

The complaint alleges Robinhood violated its customer agreement when it failed to disclose that it would “randomly pull a profitable stock from its platform.” It claims Robinhood’s explanation for the decision was inadequate and that the company disadvantaged the plaintiffs by banning them from trades that were accessible on other platforms.

The complaint accuses Robinhood of failing to execute orders requested by its customers even prior to prohibiting trades on specific stocks, including GameStop ($GME). Users on WallStreetBets have complained, for instance, that Robinhood canceled limit orders—orders instructing the platform to conduct certain trades automatically when a stock reaches a set price—even though Robinhood accepted those orders hours before the restrictions.

Additionally, the traders bringing the suit accuse Robinhood of acting in bad faith and failing to inform customers “in a timely manner” of the drastic changes it executed on Thursday—and of negligence that caused “losses and damages that would not have occurred but for Robinhood’s gross breach of its duty of due care.”

“Robinhood essentially abandoned its customers altogether by pulling GME, a standard of care so far below what is required for a business engaging in time sensitive trading services that it amounts to a complete abandonment of its duties,” the complaint states.

The plaintiff is named as Brendon Nelson of Massachusetts and the suit is brought on behalf of all Robinhood customers within the United States.

One of the top posts on WallStreetBets is currently an open call to join in a class action against Robinhood. “Everyone comment here if you have/had shares or calls in GME held in Robinhood at market open today,” user Shrubber wrote, “Let’s show these guys the system can’t fuck with us!” It’s not clear if Shrubber and Nelson are the same party; there is however, a high likelihood that this incident results in several related class-action suits which may or may not be consolidated down the line.

Citing extreme market volatility, Robinhood claimed in a blog post that it prevented users from buying stocks from more than a dozen companies, including GameStop, AMC Entertainment, Bed Bath and Beyond, and American Airlines. The move threw WallStreetBets users into a rage, as they scrambled to find other ways to trade. Some called for users to file complaints against Robinhood with the Securities and Exchange Commission.

A Robinhood spokesperson declined to comment.

The lawsuit ups the stakes in a rapidly evolving war playing out in the financial markets. On one side are the retail investors of WallStreetBets (as well as a number of extremely wealthy major financial players), who are actively investing money in companies like GameStop—stocks of which were shorted by hedge funds. The influx of trades raised GameStop’s stock by hundreds of dollars, resulting in at least one hedge fund, Melvin Capital, eating a “huge loss” on its bet that GameStop’s stock price would drop. This early victory for WallStreetBets has since moved investors to throw cash at other struggling companies.

The uproar over Robinhood’s decision to block its users from buying these stocks extended well beyond Reddit, with members of Congress now getting involved.

“This is unacceptable. We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit,” Rep. Alexandria Ocasio-Cortez tweeted Thursday. “As a member of the Financial Services [Committee], I’d support a hearing if necessary.”

In response to the New York congresswoman, Sen. Ted Cruz—the political and spiritual opposite of Ocasio-Cortez—said: “Fully agree.” Ocasio-Cortez declined Cruz’s invitation to bipartisanship, however, on the grounds that the Texas senator “almost had me murdered 3 weeks ago” by lending credence to bogus claims of voter fraud that resulted in pro-Trump rioters ransacking the Capitol building on Jan. 6.

Source:https://gizmodo.com/robinhood-sued-by-furious-gamestop-stockholders-1846151685

RSS Latest Press Release

  • The Mold Girl Ramps Up Annual Air Quality Testing Following High Demand
    Daniel Island, SC – Entrepreneur Elizabeth Keefer, aka The Mold Girl, is stepping up to meet demand from worried residents concerned about their homes being afflicted with significant health hazards.   Keefer, a well-respected council-certified indoor environmental professional, is now offering annual air quality testing for homeowners worried their homes could have mold, allergens, or other […]
  • Wendy's and Google Cloud partner to enhance the Wendy's restaurant experience
    Wendy's®  and Google Cloud today announced a partnership to enhance Wendy's restaurant experience and unlock new customer, restaurant, and employee experiences through data-driven insights.Wendy's intends to leverage Google Cloud's data analytics, artificial intelligence (AI), machine learning (ML), and hybrid cloud tools to create new ways customers can order food in the drive-thru, on their mobile […]
  • Unique Custom Marine Vault Launches New Storage Boating Facility
    Pompano Beach, FL: A new 25,000 sqft boat storage warehouse has opened to offer the best complete boat care service in Florida’s Pompano Beach.   Owned and operated by Unique Custom Marine Vault, the unit is a safe and secure marine facility with an in-house mechanic and boat transporters.    “If you are looking for a […]
  • Dreamstime launches the "Cover of the Year 2021 in Romania" contest with prizes totaling 7,500 Euros.
    Dreamstime, the world’s largest stock photo community, together with Cărturești and PressOne, announces the launch of the "Cover of the Year 2021 in Romania" contest for book cover illustrations. Publishers or graphic artists who have published books with original covers throughout 2020 and 2021 are invited to participate. Participants can submit covers using stock media […]