In January 2021, stock trading app Robinhood infuriated users when it responded to surging trades of so-called meme stocks, by halting trades—effectively preventing users from selling shares until the prices had collapsed. Congressional hearings, regulatory probes, and a deluge of regulatory complaints and lawsuits ensued, which was at least one cause of its initial public offering’s wretched post-IPO performance. A year later, at least one investor has finally succeeded in forcing Robinhood to pay out for the fiasco.
As Marketwatch first reported, on Jan. 6, an arbitrator for the Financial Industry Regulatory Authority (FINRA) ruled in favor of 27-year-old truck driver Jose Batista’s May 2021 complaint that the restrictions caused him to lose significant amounts of money, finding the stock-trading app owes him nearly $29,500 in restitution. FINRA has previously slapped Robinhood with roughly $70 million in penalties for system outages in March 2020, issuing false and/or misleading information to investors, and failing to abide by rules designed to protect investors; the Securities and Exchange Commission also fined the company $65 million in 2020 on similar grounds. But according to Marketwatch, this is the first time any retail investor complaints specifically related to the 2021 meme stock restrictions have resulted in a monetary judgment.
That’s perhaps because previous attempts to get the company to pay up have relied on elaborate theories Robinhood halted the trades in order to please partner Citadel Securities, its prime market maker. The exact nature of Robinhood’s relationship with Citadel attracted attention from both angry investors and members of Congress. FINRA has previously concluded the accusations of collusion had no merit.
[…]
Batista made a “narrow and specific case” against Robinhood, according to Marketwatch, saying that he focused on how the restrictions made him unable to manage his investments in headphone maker Koss and fast-fashion retailer Express Inc. Shortly before the restrictions went into place, Koss was trading at $58 a share and Express was trading at $9.55; by the time Robinhood lifted them, Koss was down to $35 and Express shares were just $5. (While he had Gamestop stock, he had no intention of selling at that point, he told Marketwatch.)
“My plan was to sell Koss and Express that day,” Batista told the site. “I had a lot, but no one could buy it… They basically left me with no other option. They were saying ‘You’re just stuck. If you want to sell it. Sell it.’”
[…]
Batista made a “narrow and specific case” against Robinhood, according to Marketwatch, saying that he focused on how the restrictions made him unable to manage his investments in headphone maker Koss and fast-fashion retailer Express Inc. Shortly before the restrictions went into place, Koss was trading at $58 a share and Express was trading at $9.55; by the time Robinhood lifted them, Koss was down to $35 and Express shares were just $5. (While he had Gamestop stock, he had no intention of selling at that point, he told Marketwatch.)
“My plan was to sell Koss and Express that day,” Batista told the site. “I had a lot, but no one could buy it… They basically left me with no other option. They were saying ‘You’re just stuck. If you want to sell it. Sell it.’”
[…]
Source: Robinhood Must Pay User $29,460 Over Meme Stock Trading Halt
Robin Edgar
Organisational Structures | Technology and Science | Military, IT and Lifestyle consultancy | Social, Broadcast & Cross Media | Flying aircraft