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The internet is ablaze amidst reports that popular financial services app Robinhood took action to illegally prevent users from purchasing shares of GME, AMC, and other companies late last month.
On January 28th, Robinhood tweeted that they would be halting purchases of stocks such as AMC and GME due to “market volatility.”
In reality, these stocks were part of a select list compiled by Redditors on the increasingly-popular thread r/wallstreetbets. The Ferraro Law Firm has come to the defense of Robinhood users who were barred from executing trades on these stocks.
When appearing on Fox Business Network on Tuesday morning, Sean Burstyn, Esq., argued that the halted buying occurred in a manner that prevented independent internet investors from capitalizing on the risky short positions of established hedge funds and financial institutions:
“By the time there was a disconnect between [Robinhood] customers’ interests and the institutions that support it—the institutions that it will need to support it when it has an IPO—it turned its back on its customers.”
When pressed on the issue, Robinhood’s leadership admitted that their decision “was a bad outcome for customers” and stated the halted trading was a move intended to help raise capital. However, they also denied having what prominent business journalist Andrew Ross Sorkin described as a “liquidity crisis.” Robinhood appears to be incompetent, malicious, or both.
In fact, Robinhood is currently a privately-traded entity on the verge of becoming an IPO. Burstyn, the team at Ferraro Law, and co-counsel Jeffrey Kwatinetz believe Robinhood’s motion to halt the purchase of GME and other stocks was not an attempt to protect its users, but rather an attempt to protect itself and entrenched Wall Street institutions at the expense of retail investors. Should the app decide to go public, these larger investors would be an obvious avenue for securing adequate funding and buyers of Robinhood customers’ data.
In a twist of immense irony, the app affably named to target working-class, independent investors has angered and—in many cases completely alienated—their userbase. In fact, a flood of over 300,000 negative reviews on Google’s app store has lowered Robinhood’s rating to one star.
Additionally, many celebrities and leaders have echoed Robinhood users’ frustration during these difficult and uncertain times. Among them are Senator Elizabeth Warren, Elon Musk, and Congresswoman Alexandria Ocasio-Cortez.
Unfortunately for Robinhood, this is far from the first time they have broken the trust of their userbase. Less than one month prior to these allegations, Robinhood was fined $65 million dollars for misleading users. In this late December 2020 controversy, the app was under fire for selling their users’ stock orders and selling them to larger trading firms that finalize the trade in a process known as “payment for order flow.”
According to federal regulators, the company kept users in the dark by carefully omitting this from its FAQ page from 2015-2018. Although Robinhood insists that these are past transgressions that no longer plague the company, the Massachusetts Securities Division has filed a lawsuit in claiming they’ve used “gaming strategies to manipulate customers.”
The Ferraro Law Firm, along with Jeffrey Kwatinetz and Sean Burstyn, are committed to holding Robinhood and any co-conspirators accountable for this most recent controversy. We have come forth to represent plaintiffs in this class action case against Robinhood and other wrongdoers.