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Brokers are worried about their legal exposure at this point. They could face lawsuits from investors in Melvin and other hedge funds, who will allege that th
by snowwrestler 6y ago
Brokers are worried about their legal exposure at this point.
They could face lawsuits from investors in Melvin and other hedge funds, who will allege that the brokers knew they were facilitating intentional financial harm. It doesn’t matter if these are likely to fail; they are expensive lawsuits to defend against and therefore may result in settlements.
And they could face class action litigation from trial lawyers representing retail investors who lose money when the bubble finally bursts. Again, maybe the brokers will win these suits but they are expensive and bad for the brand. “I used Robinhood and lost my life’s savings” is not the news story they want to see 2 months from now. (Edit to clarify: class action litigators have PR strategies to feed these stories to reporters, hoping bad press will convince their target to settle.)
- vincentmarle 6y ago> They could face lawsuits from investors in Melvin and other hedge funds Wait until Robinhood sees the class action lawsuit
- nico_h 6y agoShouldn't they have an arbitration clause in there somewhere? Maybe that would open them to a Thousand Papercut bleeding when everyone activate the arbitration clause at once.
- snarf21 6y agoClass action lawsuits never tend to work out that well for the little guy. Lawyers get rich and the Goliath pays essentially a fine.
- azemetre 6y agoClass action lawsuits are about people punishing companies because the government won't levy a harsh enough penalty. I never took part in a class action because I wanted "a payday," I take part in them because I want the company punished.
- derwiki 6y agoWouldn’t forced arbitration in the TOS prevent that?
- jMyles 6y ago> who will allege that the brokers knew they were facilitating intentional financial harm Is it possible to make such an allegation in a way that doesn't also plausibly describe parts of the everyday behavior of a hedge fund?
- ceejayoz 6y ago> They could face lawsuits from investors in Melvin and other hedge funds, who will allege that the brokers knew they were facilitating intentional financial harm. That'd be a gutsy move from a firm that takes a big short position and then publicly bashes a stock.
- alexggordon 6y ago"Intentional financial harm" is not illegal, otherwise shorting stocks would be illegal. There is also no court precedence for normal market maneuvers that happen to have a significantly negative outlook on a company. Imagine if Gamestop sued TD Ameritrade for facilitating short market orders for Goldman Sachs? It would be a joke. Same thing for if Melvin sues--they over exposed themselves and paid for it. There's nothing here that's illegal. Insider Trading, Pump and dump schemes, etc all require coordinated distribution or communication of false and/or non-public information. What's happening with GME is happening in the public, in full view of everyone, with a goal of exploiting a hedge fund that overexposed itself through a short squeeze. Short squeezes are legal, and have a large storied history over the last couple decades.
- FireBeyond 6y agoGood point. Hedge funds pay for things that are ostensibly public, but with very high entry points, to understand the market - witness satellite surveilling of Chinese factory activity, Walmart parking lots, laying private fiber. WSB was the very definition of public information, open social media.
- randomopining 6y agoWonder if I should cash in my BTC on Robinhood. If they go under then I lose everything right?