The no-fee trading app Robinhood was forced to pay a $65 million fine last month for misleading users as to the cost of trading stocks on its platform. With its most recent move to block certain trades in a volatile market, critics accuse it of sacrificing its mission to “democratize” trading to defend the wealth of Wall Street hedge fund managers.
Users of the no-fee stock trading app Robinhood have filed a class action lawsuit after the company reportedly blocked their ability to buy certain stocks on Thursday. Meanwhile, users are reporting Robinhood is selling their stocks without their permission, at rock-bottom prices.
The suit alleges that Robinhood “breached its Customer Agreement by, among other things, failing to disclose that its platform was going to randomly pull a profitable stock from its platform; that Robinhood failed to provide adequate explanation to their customers; that Robinhood knowingly put their customers at a disadvantage compared to customers who used other trading apps; that Robinhood failed to provide access to its own financial incentives to pull certain securities including GME; that Robinhood’s prohibited plaintiffs from performing in a timely manner (or at all) under the contract; that Robinhood failed to comply with all applicable legal, regulatory, and licensing requirements; and that Robinhood failed to exercise trades and actions requested by customers.”
Cabeceiras claimed that “hundreds of individuals” are “reaching out to be added to this suit.”
Nelson’s complaint comes after Robinhood stopped letting users buy new stocks in several companies currently experiencing booms, including American Airlines, AMC, and GameStop, the latter of which has seen its value shoot sky-high in recent days. The stocks have been targeted by a group of amateur online traders who coordinate their efforts on the subreddit WallStreetBets on the Reddit messaging board site. Their activities have caused short-sellers, or deep pocket institutional stock traders who gamble that a stock’s value will fall in the future, to lose big as stock prices keep rising.
“We continuously monitor the markets and make changes where necessary. In light of recent volatility, we are restricting transactions for certain securities to position closing only … We also raised margin requirements for certain securities,” a blog post by the firm reads. Some of the stocks blocked from being purchased beyond GameStop are Nokia, AMC, Bed, Bath & Beyond, Express, Koss, and Naked Brand Group.
Motherboard reported that the decision affects more than half of all Robinhood’s roughly 13 million users, as ownership of GameStop stock is so widespread.
Robinhood Forcibly Selling Users’ Stocks
Robinhood users began reporting something still more nefarious on Thursday, however, asserting that the company was selling their stock without their permission.
Where that price came from is unclear, since its value on Thursday ranged from $112.00 to $493.00.
Stock prices of GameStop (GME) on January 28, 2021
Others reported that orders for stock were cancelled and refunded by Robinhood. Michelle Witte, a journalist who co-hosts Political Misfits on Radio Sputnik, said her order of $15 in American Airlines stock was returned several hours after her purchase, with a message claiming that she herself had cancelled the order.
Billionaire industrialist Elon Musk, whose tweets about the affair have helped to drive GameStop’s value, sounded off about the forced selloffs, calling short-selling “a scam, legal only for vestigial reasons.”
December 2020 SEC Probe
This is not the first time Robinhood has faced scrutiny for its trading practices.
“Robinhood provided misleading information to customers about the true costs of choosing to trade with the firm,” Stephanie Avakian, director of the SEC’s Enforcement Division, said in the news release. “Brokerage firms cannot mislead customers about order execution quality.”
Dan Gallagher, chief legal officer at Robinhood and a former SEC official, told Fox Business at the time that “The settlement relates to historical practices that do not reflect Robinhood today. We recognize the responsibility that comes with having helped millions of investors make their first investments, and we’re committed to continuing to evolve Robinhood as we grow to meet our customers’ needs.”
Sourse: sputniknews.com
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