Robinhood Lawsuit Filed in New York For Stock Restriction Outrage
Top New York officials say an investigation is underway related to Robinhood's handling of stocks. A lawsuit was also filed in New York over the outrage of the app restricting stocks.
New York Attorney General Letitia James released the following statement in regards to recent activity related to the Robinhood application and the trading of GameStop stock:
“We are aware of concerns raised regarding activity on the Robinhood app, including trading related to the GameStop stock. We are reviewing this matter.”
A class-action lawsuit was also filed Southern District of New York on Thursday allegedly the trading app restricted the trading of some stocks.
"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," the lawsuit states.
Robinhood restricted buying after a Reddit page helped skyrocket the price of several stocks, including GameStop, AMC and BlackBerry, by buying stock in those companies in bulk. The lawsuit alleges Robinhood manipulated the open market by not giving investors the ability to invest and
"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,” Rep. Alexandria Ocasio-Cortez (D-N.Y) tweeted.
Members of the WallStreetBets helped drive up the price of GameStop and AMC's stocks in what's believed to be a coordinated effort to punish short-sellers betting on the stock's decline. GameStop's stock rose by over 400 percent this week.
Incoming Senate Banking and Housing Committee chair Sherrod Brown (D-Ohio) announced he intends to hold a hearing on the current state of the stock market.
“People on Wall Street only care about the rules when they’re the ones getting hurt. American workers have known for years the Wall Street system is broken – they’ve been paying the price. It’s time for the SEC and Congress to make the economy work for everyone, not just Wall Street," Brown said in a statement.
Robinhood said in a statement the decision to block purchases of some stocks was a "risk-management decision, and was not made on the direction of the market makers we route to." The trading app will "allow limited buys" of the stocks on Friday. Below is the full statement from Robinhood:
This past year, we’ve seen the financial markets become a voice for the voiceless. We’ve seen a new generation of people come into the markets, sparking conversations about what it means to be an investor. Our customers have shown the world that investing is for everyone—not just institutional investors and hedge funds.
Amid this week’s extraordinary circumstances in the market, we made a tough decision today to temporarily limit buying for certain securities. As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment. These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today.
Starting tomorrow, we plan to allow limited buys of these securities. We’ll continue to monitor the situation and may make adjustments as needed.
To be clear, this was a risk-management decision, and was not made on the direction of the market makers we route to.
We stand in support of our customers and the freedom of retail investors to shape their own financial future. Democratizing finance has been our guiding star since our earliest days. We will continue to build products that give more people—not fewer—access to our financial system. We’ll keep monitoring market conditions as we look to restore full trading for these securities. We will update this Help Center article with the latest changes.
We are deeply grateful to our customers.
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