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What are they even alleging RH did wrong? Any broker is free to decide what the let their customers trade. They could restrict buying AAPL if they wanted to. Th

What are they even alleging RH did wrong? Any broker is free to decide what the let their customers trade. They could restrict buying AAPL if they wanted to. This is like trying to sue a bar for having stopped serving your favourite beer. There is absolutely no case here.

avereveard 6y ago
found the "should just build their own exchange with their rules!" comment
JumpCrisscross 6y ago
> There is absolutely no case here. There isn't, but I think one can make the case that there should be. At the very least, communication from Robinhood, from the exchanges and from regulators was piss poor. As a result, we have half the internet wrapped up in some Ken Griffin as Gordon Gecko Batman conspiracy theory. Robinhood was criticized for marketing day trading to people who, to a large degree, didn't know better. The counterargument was people knew what they were getting into and were free to do it. Fair enough. This adds a new wrinkle. It wasn't ever a day trading platform! A day trading platform should be able to handle high volumes. It should be able to handle increased collateral requirements. It should be able to handle some market makers going offline. What Robinhood did is contractually allowed. But it flies in the face of what they held themselves out to be. Robinhood sold a turd doughnut, folks said "it's fine, I want a turd doughnut," and then the turd turned out to be uranium.
- this_user 6y ago
  Anyone who has a bit of experience trading the markets saw this (or something like this) coming for days. Just because these people don't know the first thing about market regulation doesn't mean they have a case. What they did was effectively form a public stock pool for the purpose of disrupting the orderly function of the market, and drive up the price beyond all reason. This kind of thing used to happen regularly a century ago until regulation was enacted in order to stem that kind of abuse. If the SEC weren't in what appears to be a coma, they should have enforced those rules days ago by completely halting trading in the stock. But it seems that falls on private companies now for some reason.
  - imtringued 6y ago
    What prevented short sellers from closing their position 10 days ago? Why are they still short selling to this day?
    - deleted 6y ago
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    - deleted 6y ago
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mynameisvlad 6y ago
https://www.investor.gov/introduction-investing/investing-basics/glossary/market-manipulation https://www.investor.gov/introduction-investing/investing-ba... > Rigging quotes, prices, or trades to make it look like there is more or less demand for a security than is the case. By restricting only buying, they effectively rigged the prices to make it look like there's less demand than is the case.
- avereveard 6y ago
  don't know why this is downvoted. they literally enabled the short holders to engage in a ladder attack with a fraction of the volume it would have required otherwise.
zaroth 6y ago
What are you basing these statements on? Are you a legal expert in FINRA? Legally this is nothing at all like not serving a specific brand of alcohol at the local bar. IANAL, and I’ve only dipped my toe into studying FINRA while doing research on decentralized exchanges, but as I understand it, FINRA regulations impose a lot of requirements on brokers, particularly around fair dealing and around preventing market manipulation.
- this_user 6y ago
  The only manipulation anyone is engaging in are the WSB people, and they should be prosecuted to the full extent of the law, and should be made to forfeit any and all profits made from this criminal scheme plus penalties and a permanent ban from trading securities.
  - WitCanStain 6y ago
    That seems excessive. Not to mention unrealistic - how do you prove that any single person engaged in a crime?
  - Nimitz14 6y ago
    Amusing to see someone so confidently wrong about something.
  - imtringued 6y ago
    That makes no sense. If you set that precedent then hedge funds will short more than 100% of every company on the stock market and make a lot of money of that. Do you know what short selling more than 100% of the available stock does? It's the same as if every single stock owner collectively decided to sell their shares. Worse 140% of the float was shorted which means the amount of people that sold their shares was bigger than the entire market. That's an extreme example of market manipulation and that is what happened to GME. It was trading at $4 per share when its fundamentals would value it at $20. You're also forgetting that this started with the Chewy CEO buying a 13% share in the market because he wanted to turn Gamestop into a growing company. That was the day when short sellers should have started sweating but they kept shorting more and more. They could have made a lot of money by closing their positions. If they had done so they could have shorted Gamestop again once its digital business turns out to be a dud and short it again with almost no risk. Why on earth did they not do the responsible thing? Come on. It's extremely crazy what they did and it can only be explained by greed. When you short a stock from $20 or more to $4 the only upside left is that the stock literally goes to $0. That's a measly $4 when you already have safe $16 gains per share. Unfortunately they failed to close their shorts and become rich. I don't know exactly how much Melvin Capital had in shorts but they probably could have made $3-6 billion off reasonably safe shorts. If they started at $3 billion they would have basically trippled their starting capital. That's a bitcoin bubble level of return with a fraction of the risk. It was almost guaranteed money. Now enter greed. They never exited their shorts until recently and they probably didn't exit all of them. Other hedgefunds still keep shorting the stock even though it is going up astronomically. How does wall street bets enter the picture? Wallstreet bets is just a place where your average retail investor posts some memes about how much money they have lost. They've grown thick skin and are willing to trade $300 or $600 with the full expectation of losing the entire investment. They absolutely love household brands. They shill Nokia, Blackberry and also Gamestop. Here is the thing. They know that short sellers are holding the bag and completely "overshorted" the market and put themselves into a really bad position of their own making. They started buying the stock because it fits with the WSB theme. They value the stock like a beanie baby. The stock itself is what they care about, not how much it costs and that means they will not sell their precious stock. It's like any other consumer good. They are basically decorating their broker trading apps with stocks and the accompanying losses. It's purely about fun. Okay now lets go back to what you said. > The only manipulation anyone is engaging in are the WSB people, As I said they basically buy shares and hold them. What I haven't said is that WSB is a tiny fraction of the buyers of GME. There are lots of large institutional traders investing into GME. The only difference is that WSB types tend to be slow and just end up holding the stock way too long. Either by accident or intentionally. This idiotic slowness is actually very bad for short sellers because they bank on desperate people selling their shares in a panic. It's a situation in which the disadvantaged retail trader somehow does not suffer from his weaknesses. >and they should be prosecuted to the full extent of the law, They aren't breaking any laws. The short sellers are potentially doing illegal naked shorts. We don't know but considering that more than the 60 million shares are shorted its not impossible that 5 million of them are naked. >and should be made to forfeit any and all profits made from this criminal scheme What about the act of selling all shares in a market to artificially drop the value of a share below its fundamental value? Why is that not a criminal scheme? I'll repeat, if you let the short sellers get away with this then they can get away with anything. They can tank any stock simply through the act of shorting. If shorting 100% isn't enough then they'll go for %200. If that isn't enough they will short %300. There is no limit to how many shares you can short just like there is no limit to how much debt banks can create if it wasn't for reserve requirements. With this strategy you can reduce the market cap of any stock to zero. Think of destroying Apple overnight. That's what you can do with naked shorts. >plus penalties and a permanent ban from trading securities. The only counter strategy against an over shorted stock is to just buy it. There is absolutely nothing illegal about buying stocks. However, if you make it impossible to buy it then you basically make the short selling scheme self fulfilling because it has no natural predator.
kosh2 6y ago
There is a case because of the reasons behind it. Say an auction house auctions off a picture. But right during the auction they announce, point to their TOS, that out of all the present bidders, only 1 person is allowed to bid. This one person then buys the picture at a fraction of the price that would have been expected if all people were allowed to bid. On top of that it turns out that the one person bidding is part of a museum that has a significant stake in the auction house. Of course comparisons like that break quickly. But it is very obvious that market-makers (or other players behind the scenes) were extremly worried about the coming squeeze and did that to stop the stock from going higher.
- jcranmer 6y ago
  From what I've read in the complaint, the reason they're alleging is "no reason," although one claim does list "market manipulation" as a reason with no other facts to support that (which strikes me as something to be stricken as a conclusatory allegation, not a factual allegation, but I'm not a lawyer here). Especially for something as complicated as security law, I'd expect to see an entire section on market manipulation laying out what the precedent says they need to allege to substantiate their claims and then detailing enough facts (or beliefs to be made good on in discovery) to make that claim credible. Without it, the complaint comes across less as "Robinhood clearly broke the law" and more as "I'm whining because I don't like the contract I signed with Robinhood."
- willyg123 6y ago
  There isn't a case because every user signed an arbitration agreement that prevents a class action from moving forward[1] [1]https://cdn.robinhood.com/assets/robinhood/legal/Customer%20Agreement.pdf https://cdn.robinhood.com/assets/robinhood/legal/Customer%20...
  - qaq 6y ago
    and I guess we will see in court how enforceable that is in this case
MaxBarraclough 6y ago
> Any broker is free to decide what the let their customers trade. This exact point turned up 4 hours ago in another thread: https://news.ycombinator.com/item?id=25946004 https://news.ycombinator.com/item?id=25946004
cactus2093 6y ago
A bar is purely for entertainment though, and that is what everyone expects. A stock brokerage is a service people count on to be able to execute their trades, some people even make a living from it. So it's more like if the electric company just decided to shut off power to your factory one day, or the bank just decided not to open one day that they were supposed to be open and you were unable to withdraw money that you needed. These are things you might reasonably try to sue over if they caused you tangible damages. And even more so if the other party might have a vested interest in stopping you. Of course you might not always win. In the case of Robinhood, since people could still close their existing positions there might not be a very strong case to be able to prove damages. But to me it's still not a crazy lawsuit to attempt based on how many people were expecting to be able to use RH to buy this stock today, and that's what the legal system is there for.

avereveard 6y ago

found the "should just build their own exchange with their rules!" comment

JumpCrisscross 6y ago

> There is absolutely no case here. There isn't, but I think one can make the case that there should be. At the very least, communication from Robinhood, from the exchanges and from regulators was piss poor. As a result, we have half the internet wrapped up in some Ken Griffin as Gordon Gecko Batman conspiracy theory. Robinhood was criticized for marketing day trading to people who, to a large degree, didn't know better. The counterargument was people knew what they were getting into and were free to do it. Fair enough. This adds a new wrinkle. It wasn't ever a day trading platform! A day trading platform should be able to handle high volumes. It should be able to handle increased collateral requirements. It should be able to handle some market makers going offline. What Robinhood did is contractually allowed. But it flies in the face of what they held themselves out to be. Robinhood sold a turd doughnut, folks said "it's fine, I want a turd doughnut," and then the turd turned out to be uranium.

this_user 6y ago
Anyone who has a bit of experience trading the markets saw this (or something like this) coming for days. Just because these people don't know the first thing about market regulation doesn't mean they have a case. What they did was effectively form a public stock pool for the purpose of disrupting the orderly function of the market, and drive up the price beyond all reason. This kind of thing used to happen regularly a century ago until regulation was enacted in order to stem that kind of abuse. If the SEC weren't in what appears to be a coma, they should have enforced those rules days ago by completely halting trading in the stock. But it seems that falls on private companies now for some reason.
- imtringued 6y ago
  What prevented short sellers from closing their position 10 days ago? Why are they still short selling to this day?
  - deleted 6y ago
    [deleted]
  - deleted 6y ago
    [deleted]

mynameisvlad 6y ago

https://www.investor.gov/introduction-investing/investing-basics/glossary/market-manipulation https://www.investor.gov/introduction-investing/investing-ba... > Rigging quotes, prices, or trades to make it look like there is more or less demand for a security than is the case. By restricting only buying, they effectively rigged the prices to make it look like there's less demand than is the case.

avereveard 6y ago
don't know why this is downvoted. they literally enabled the short holders to engage in a ladder attack with a fraction of the volume it would have required otherwise.

zaroth 6y ago

What are you basing these statements on? Are you a legal expert in FINRA? Legally this is nothing at all like not serving a specific brand of alcohol at the local bar. IANAL, and I’ve only dipped my toe into studying FINRA while doing research on decentralized exchanges, but as I understand it, FINRA regulations impose a lot of requirements on brokers, particularly around fair dealing and around preventing market manipulation.

this_user 6y ago
The only manipulation anyone is engaging in are the WSB people, and they should be prosecuted to the full extent of the law, and should be made to forfeit any and all profits made from this criminal scheme plus penalties and a permanent ban from trading securities.
- WitCanStain 6y ago
  That seems excessive. Not to mention unrealistic - how do you prove that any single person engaged in a crime?
- Nimitz14 6y ago
  Amusing to see someone so confidently wrong about something.
- imtringued 6y ago
  That makes no sense. If you set that precedent then hedge funds will short more than 100% of every company on the stock market and make a lot of money of that. Do you know what short selling more than 100% of the available stock does? It's the same as if every single stock owner collectively decided to sell their shares. Worse 140% of the float was shorted which means the amount of people that sold their shares was bigger than the entire market. That's an extreme example of market manipulation and that is what happened to GME. It was trading at $4 per share when its fundamentals would value it at $20. You're also forgetting that this started with the Chewy CEO buying a 13% share in the market because he wanted to turn Gamestop into a growing company. That was the day when short sellers should have started sweating but they kept shorting more and more. They could have made a lot of money by closing their positions. If they had done so they could have shorted Gamestop again once its digital business turns out to be a dud and short it again with almost no risk. Why on earth did they not do the responsible thing? Come on. It's extremely crazy what they did and it can only be explained by greed. When you short a stock from $20 or more to $4 the only upside left is that the stock literally goes to $0. That's a measly $4 when you already have safe $16 gains per share. Unfortunately they failed to close their shorts and become rich. I don't know exactly how much Melvin Capital had in shorts but they probably could have made $3-6 billion off reasonably safe shorts. If they started at $3 billion they would have basically trippled their starting capital. That's a bitcoin bubble level of return with a fraction of the risk. It was almost guaranteed money. Now enter greed. They never exited their shorts until recently and they probably didn't exit all of them. Other hedgefunds still keep shorting the stock even though it is going up astronomically. How does wall street bets enter the picture? Wallstreet bets is just a place where your average retail investor posts some memes about how much money they have lost. They've grown thick skin and are willing to trade $300 or $600 with the full expectation of losing the entire investment. They absolutely love household brands. They shill Nokia, Blackberry and also Gamestop. Here is the thing. They know that short sellers are holding the bag and completely "overshorted" the market and put themselves into a really bad position of their own making. They started buying the stock because it fits with the WSB theme. They value the stock like a beanie baby. The stock itself is what they care about, not how much it costs and that means they will not sell their precious stock. It's like any other consumer good. They are basically decorating their broker trading apps with stocks and the accompanying losses. It's purely about fun. Okay now lets go back to what you said. > The only manipulation anyone is engaging in are the WSB people, As I said they basically buy shares and hold them. What I haven't said is that WSB is a tiny fraction of the buyers of GME. There are lots of large institutional traders investing into GME. The only difference is that WSB types tend to be slow and just end up holding the stock way too long. Either by accident or intentionally. This idiotic slowness is actually very bad for short sellers because they bank on desperate people selling their shares in a panic. It's a situation in which the disadvantaged retail trader somehow does not suffer from his weaknesses. >and they should be prosecuted to the full extent of the law, They aren't breaking any laws. The short sellers are potentially doing illegal naked shorts. We don't know but considering that more than the 60 million shares are shorted its not impossible that 5 million of them are naked. >and should be made to forfeit any and all profits made from this criminal scheme What about the act of selling all shares in a market to artificially drop the value of a share below its fundamental value? Why is that not a criminal scheme? I'll repeat, if you let the short sellers get away with this then they can get away with anything. They can tank any stock simply through the act of shorting. If shorting 100% isn't enough then they'll go for %200. If that isn't enough they will short %300. There is no limit to how many shares you can short just like there is no limit to how much debt banks can create if it wasn't for reserve requirements. With this strategy you can reduce the market cap of any stock to zero. Think of destroying Apple overnight. That's what you can do with naked shorts. >plus penalties and a permanent ban from trading securities. The only counter strategy against an over shorted stock is to just buy it. There is absolutely nothing illegal about buying stocks. However, if you make it impossible to buy it then you basically make the short selling scheme self fulfilling because it has no natural predator.

kosh2 6y ago

There is a case because of the reasons behind it. Say an auction house auctions off a picture. But right during the auction they announce, point to their TOS, that out of all the present bidders, only 1 person is allowed to bid. This one person then buys the picture at a fraction of the price that would have been expected if all people were allowed to bid. On top of that it turns out that the one person bidding is part of a museum that has a significant stake in the auction house. Of course comparisons like that break quickly. But it is very obvious that market-makers (or other players behind the scenes) were extremly worried about the coming squeeze and did that to stop the stock from going higher.

jcranmer 6y ago
From what I've read in the complaint, the reason they're alleging is "no reason," although one claim does list "market manipulation" as a reason with no other facts to support that (which strikes me as something to be stricken as a conclusatory allegation, not a factual allegation, but I'm not a lawyer here). Especially for something as complicated as security law, I'd expect to see an entire section on market manipulation laying out what the precedent says they need to allege to substantiate their claims and then detailing enough facts (or beliefs to be made good on in discovery) to make that claim credible. Without it, the complaint comes across less as "Robinhood clearly broke the law" and more as "I'm whining because I don't like the contract I signed with Robinhood."
willyg123 6y ago
There isn't a case because every user signed an arbitration agreement that prevents a class action from moving forward[1] [1]https://cdn.robinhood.com/assets/robinhood/legal/Customer%20Agreement.pdf https://cdn.robinhood.com/assets/robinhood/legal/Customer%20...
- qaq 6y ago
  and I guess we will see in court how enforceable that is in this case

MaxBarraclough 6y ago

> Any broker is free to decide what the let their customers trade. This exact point turned up 4 hours ago in another thread: https://news.ycombinator.com/item?id=25946004 https://news.ycombinator.com/item?id=25946004

cactus2093 6y ago

A bar is purely for entertainment though, and that is what everyone expects. A stock brokerage is a service people count on to be able to execute their trades, some people even make a living from it. So it's more like if the electric company just decided to shut off power to your factory one day, or the bank just decided not to open one day that they were supposed to be open and you were unable to withdraw money that you needed. These are things you might reasonably try to sue over if they caused you tangible damages. And even more so if the other party might have a vested interest in stopping you. Of course you might not always win. In the case of Robinhood, since people could still close their existing positions there might not be a very strong case to be able to prove damages. But to me it's still not a crazy lawsuit to attempt based on how many people were expecting to be able to use RH to buy this stock today, and that's what the legal system is there for.