Many Robinhood users have filed a class-action lawsuit against Robinhood trading app. This came after Robinhood stopped users from buying shares of certain stocks; AMC, GameStop, etc. Read below to find out what happened with Robinhood app.
Robinhood had stopped users from buying these stocks since Thursday. Robinhood claims they did this because of the 'recent volatility' in the market on their blog post. The stocks that Robin has put trade restrictions on are GameStop, Bed, Bath and Beyond, Nokia and AMC. The lawsuit claims that the app has deprived its users of potential profits they could make by investing in these stocks.
It is not appropriate for Robinhood CEO Vlad Tenev to protect investors who shorted GameStop. Why would @RobinhoodApp help investors who thought the stock would fall & hurt investors who thought the stock would rise? @SEC_Enforcement should investigate Robinhood’s rigged actions. https://t.co/WxlavMP9ao— Ted Lieu (@tedlieu) January 29, 2021
As per a report by CNN business website, one Robinhood user filed a lawsuit in the Southern District of California. The lawsuit claims that Robinhood rigged the market against its own customers and indulged in unfair business practices. This is what the official lawsuit states, "Robinhood's actions were done purposefully and knowingly to manipulate the market for the benefit of people and financial institutions who were not Robinhood's customers."
This is unacceptable.— Alexandria Ocasio-Cortez (@AOC) January 28, 2021
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.
As a member of the Financial Services Cmte, I’d support a hearing if necessary. https://t.co/4Qyrolgzyt
GameStop stock jumped up after Reddit's group r/WallStreetBets began pumping up it up, causing heavy losses to hedge funds who had shorted GameStop stock. Since Robinhood locked the trade on these stocks, the price of GameStop at the time of writing this has gone down to 194 USD. This just goes to show how dangers pumping and shorting stocks can be, and if you're not careful you can earn or lose millions in a matter of days. In another blog post, Robinhood said that it would allow "allow limited buys of these stocks" starting from Friday.
After Robinhood halted trading on Thursday morning, a group of Reddit users started a new forum, r/ClassActionRobinHood to come together and make a joint effort on the lawsuit. At the time of writing this, the group has already collected around 40,000 users. According to a report by CNN, one of the law firms that Reddit users are employing is ChapmanAlbin LLC. in Cleveland, Ohio. This law firm specialises in investment and financial fraud. ChapmanAlbin LLC. homepage states "Are you a RobinHood user who has suffered losses?" along with a form to submit their details. The firm has collected information of more than 6,000 people as of yet, CNN reported.