Robinhood clients say the company partnered with Wall Street to stop common people from hitting wealthy hedge funds.
Amateur investors have filed more than 30 class action lawsuits against Robinhood, a technology start-up that allows ordinary people to buy and sell stocks online.
According to PCMag.com, angry customers took legal action against Robinhood just days after the platform temporarily prevented users from trading certain stocks.
While Robinhood has claimed its decision was taken without prejudice, many users of the app claim that the company wanted to do Wall Street a favor. For weeks, internet fans – many of whom frequent Reddit’s / r / WallStreetBets community – have been embroiled in a high-stakes battle against hedge funds, the latter of which had bet on GameStop and several other big, well-known brands.
Reddit users have launched a massive campaign to boost GameStop’s inventory. In a matter of days, the company’s share price skyrocketed, rising from about $ 15 per share to nearly $ 200.
The sudden shift – almost unprecedented for a company on the verge of collapse – resulted in wealthy hedge funds losing billions of dollars practically overnight.
Stock market chart. Image via Pixabay via Wikimedia Commons. Public domain.
However, Robinhood temporarily prevented its users from continuing to buy GameStop stock.
Many of the recent lawsuits filed against the app allege that the owners of Robinhood frozen GameStop trades to help the Wall Street traders with whom they are closely related.
Several of the lawsuits, according to PCMag.com, were keen to determine that Robinhood didn’t let its customers sell and trade again until GameStop stocks began to fall – something that would have benefited short sellers, much to the detriment of amateur users who did had done bought shares.
Robinhood customers – some of whom became millionaires when GameStop shares hit their cap – now say the app should be responsible for the losses caused by the app freezing on stock purchases.
“This is what the hedge funds wanted,” read a complaint filed in Florida. “If everyone just sells, the price can’t go up because nobody can buy the shares.”
Another class action lawsuit filed in a California court alleged that Robinhood violated securities laws by allegedly partnering with Wall Street.
“Robinhood (and Apex Trading Corporation) stole from the poor to give to the rich,” said the class action lawsuit.
Robinhood has consistently defended its own actions.
“We did this because the amount required to deposit into the clearing house was so high – that individual volatile securities had a deposit requirement of hundreds of millions of dollars – that we had to take steps to restrict purchases of these volatile securities. ” the company said in a statement.
Although Robinhood’s User Agreement allows the company to freeze trading at any time, the platform’s GameStop-related restrictions were so open to Wall Street that they caught the attention of Congress.
The Verge reports that Bronx MP Alexandria Ocasio-Cortez has called for a full investigation into Robinhood’s potential wrongdoing.
The company’s CEO, Vlad Tenev, is expected to testify in a congressional hearing later this month.
Robinhood faces dozens of lawsuits over GameStop stock freezing
Robinhood now faces over 30 class action lawsuits for blocking stock purchases