FINRA is Investigating Robinhood Over a Potential $26.6 Million Settlement
Robinhood, an online trading company, has been sued with a potential $26.6 million settlement.
The online stock trading company Robinhood has been sued multiple times and is now under investigation due to trading disruptions and system downtime experienced by users in 2020-21.
The multiple lawsuits filed against the company may reach a $26.6 million settlement.
The Financial Industry Regulatory Agency (FINRA), a non-profit Wall Street organization responsible for ensuring market fairness and integrity, has begun investigating the said company.
FINRA, together with other trading regulators, are investigating Robinhood for the following:
- Stopping or blocking its users from making trades related to GameStop in 2021.
- Multiple system downtimes in 2020 prevented users from accessing their accounts.
- A death lawsuit is questioning the company’s lack of guidance to younger investors.
Trade Stoppage Lawsuit Against Robinhood
In January 2021, Robinhood, together with other trading apps, took action to stop its users from trading shares with the GameStop stock.
The company’s move resulted from the unprecedented spike in the stock’s value following some message exchanges from the online message board Reddit.
Messages under the Reddit page “Wall Street Bets” reportedly encouraged multiple traders to drive the value of the GameStop stocks up.
The unstable market caused multiple trading apps, including Robinhood, to remove GameStop stock momentarily from their platform to stop users from trading shares.
The lead plaintiff, Brendan Nelson, charged Robinhood with a class action lawsuit filed in New York Southern District Court.
The lawsuit claims that Robinhood’s decision to deliberately take out the GameStop stock from their platform deprived its user’s right to possibly earn from the stock.
In addition, the plaintiff also argues that the action the company took is a manipulative act to control the market for its benefit.
System Outages Lawsuit Against Robinhood
The online brokerage app Robinhood was reported to have encountered multiple system downtimes in 2020.
The outage has stopped multiple users from carrying out trades and accessing their accounts.
One of the worst outages happened on March 2, 2020, where traders could not access the app for almost 17 hours.
The multiple downtimes had caused some serious impact on trader’s potential earnings since it happened when the stock prices were surging.
Various users have filed lawsuits against Robinhood, including one from a Florida resident named Travis Taaffe.
The plaintiff asserts that the system was inaccessible for almost a whole day on a record-breaking trade day which has caused major losses to its users.
According to the company, their system and infrastructure were not able to meet the user’s demand.
The market volatility caused a high number of users to access the app and execute trades that they were not able to handle.
Death Lawsuit Against Robinhood
Another class action lawsuit was filed against Robinhood following the death of its user, Alex Kearns.
Alex Kearns reportedly committed suicide after suspecting that he has lost around $750,000 from trading using the app.
The lawsuit was filed by Alex’s parents, who alleges that the company targets inexperienced traders.
The lawsuit asserts that the company has also failed to give guidance and support to its young users.
The Massachusetts Secretary of the Commonwealth, William Galvin, declares that Robinhood and other brokers should have stricter regulations, especially when approving young and inexperienced investors.
He asserts that young investors should be educated first about how serious trading is before they are allowed to execute trades.
Editor’s Note on FINRA Robinhood Investigation:
This article is published to inform you of the latest class lawsuits filed against Robinhood, which FINRA is investigating.
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