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Robinhood is facing nearly 50 lawsuits over GameStop frenzy

trestenhortz 6y ago
Fuck robinhood I hope they are bankrupted. A company with zero integrity. I lost a huge amount of money that day. I don’t mind losing fair and square .... make a bad call, lose the dough, pay the price - that’s the deal. I’m even ok with losing for reasons I don’t understand due to the concealed rigged nature of the markets. But losing my money on the same day that robinhood manipulates the market openly and publicly really felt unfair. I’d be most pleased if they went from pending 50 billion IPO to ZIPPO. Nothing for the founder and nothing for the investors. I hate this company. And remember if you’re considering opening an account with robinhood what you personally might lose by putting your money with them.
- deleted 6y ago
  [deleted]
- vga805 6y ago
  Multiple brokerages shut down buying due to the collateral requirements that were raised. Robinhood seems like the fall guy here, hopefully people start asking the right questions about the collateral and the manipulation there.
  - trestenhortz 6y ago
    That is absolutely not the reason that they publicly stated they stopped allowing purchasing and only allowed selling. I’d dance on the grave of this company.
    - bidirectional 6y ago
      Well then what is the reason? I've not seen anything else. The CEO was cagey when asked about liquidity, but every official release has suggested that the collateral requirements were the problem.
    - xadhominemx 6y ago
      Actually it is the reason they stated
      - sokoloff 6y ago
        There was a several hour period one evening where some “it’s for your own good because of the volatility” message was the first comms from the company on the topic.
        WoahNoun 6y ago
        That's not what the message said. It said "to protect our customers." Which is consistent with the capital requirements reason. If RH didn't meet the requirements, the entire company (all of their customers; even those who knew nothing about game) would go into receivership and the company unwound. Meanwhile, no one can sell their shares while this happens. Not meeting their capital requirements would have been very, very bad for all of RH's customers.
    - elefanten 6y ago
      Who cares? Companies rush out dumb comms under pressure then walk em back or change them. They're not obligated to stick to the first thing they said on a topic -- especially when it's customer comms. It's not a good source for answering what they did / why they did it.
  - kmlx 6y ago
    other brokerages simply put up the money. this meant that while huge swaths of the retail investors in the US (and parts of Europe) were not allowed to buy GME, other retail investors had no issues. to top it off, certain brokerages only allowed sell orders. this meant a huge imbalance in the market. i really don’t get how this is legal and why heads aren’t rolling. case in point: saxo bank let me trade GME without an issue. but since most brokerages did not put up the new collateral, and only allowed sell... basically this is a case of market manipulation by way of changing the rules in realtime. i get why they changed the rules, i don’t get why the SEC is not removing the authorisation of the participants in this scheme and also not prosecuting the companies. i’m clearly missing some info here and need to read some more on this subject.
    - joncrane 6y ago
      >other brokerages simply put up the money. Nope, multiple other brokerages including Interactive Brokers also suspended options trading and opening any new positions in the so-called "meme" stocks.
    - bidirectional 6y ago
      So what are you proposing? All brokerages must put up the collateral no matter what? Surely it is up to the individual businesses whether they can afford to, want to take the risk, etc.
      - tedunangst 6y ago
        Some people seem to be suggesting that when RH got the collateral call for funds they didn't have on hand, they should have instantly gone into receivership and wound the whole operation down, closing all accounts. Or something like that. They probably don't mean that, but it's the logical conclusion of what they're saying. Always have the required collateral or face instant annihilation.
    - gruez 6y ago
      >other brokerages simply put up the money ...assuming they had the money. On the day they suspended trading, they also raised $2B in funding the same night. A few days later they partially unrestricted trading.
- lugorrr 6y ago
  I can only recommend reading this [1] digest. [1] https://blog.bitmex.com/walkaway/ https://blog.bitmex.com/walkaway/
- dmos62 6y ago
  For the record, why did Robinhood stop the trading? I know there's been an uproar, but due to the volume of articles it's been difficult to get a clearheaded idea of why Robinhood actually did it.
  - SalimoS 6y ago
    There is an episode on NPR https://www.npr.org/2021/02/02/963466346/robinhoods-very-bad-day https://www.npr.org/2021/02/02/963466346/robinhoods-very-bad...
  - trestenhortz 6y ago
    They’ve removed the original blog post that gave their rationale. If anyone can find it I’d like to read it again. The original reason was some bullshit about protecting investors from volatility.
  - a254613e 6y ago
    Liquidity issue. Or rather, extremely close to it. The CEO said he "doesn't want to use the L word" to describe it. Basically they had to cover/deposit the purchase trades themselves, before they ran out of money to do so (liquidity issue) they shut down purchasing - then went on record on CNBC etc claiming that it's not a liquidity issue. Interview with the CEO https://youtu.be/LqoJApzkaPU?t=404 https://youtu.be/LqoJApzkaPU?t=404 where he confirms that's the case
    - deleted 6y ago
      [deleted]
  - dmos62 6y ago
    To answer my own question: quoting https://blog.bitmex.com/walkaway/ https://blog.bitmex.com/walkaway/ > "Brokers must post margin with the Depository Trust & Clearing Corporation and National Securities Clearing Corporation at the end of each day to ensure enough funds are reserved to cover any trading losses." > The “meme” stonks’ volatility skyrocketed, which meant that the clearing organisations could ask for more collateral from brokers on the grounds of needing to protect themselves from additional potential risk when settling the brokers’ trades. It takes two business days to settle stocks in the so-called digital age… > Robinhood in particular was told to come up with $4 billion, or they would not be able to facilitate any trading the following day. RH, apparently not having that much cash on-hand, said, “how about we stop trading or severely curtail trading in the stocks that are causing PAIN to various masters of the universe?” The clearing houses said, “OK, in that case, you would only need to post $700 million.” RH agreed to that figure, rushed to raise more money from the Street and/or Silicon Valley, and then subsequently shut off trading on Jan 28th and into the weekend. (This is information gleaned from an interview the CEO of RH gave to Elon Musk on Clubhouse). So, it's the clearing houses that strongarmed shutting down the trading.
say_it_as_it_is 6y ago
.. and almost ten ongoing movie, television and documentary projects about the GameStop fiasco
- victords 6y ago
  Why fiasco?
VoodooJuJu 6y ago
I'm pretty skeptical of the negative attention Robinhood is receiving. It seems like the entities who actually acted in bad faith, the ones who attempted illegal shorts, are trying to divert attention. Like someone else said, Robinhood is just the fall guy here.
- omgJustTest 6y ago
  Hard to hear. Robinhood has normalized pay for flow, a service that is literally shaving cash off each order in exchange for “free trading”. Pff can only generate net revenue by making traders pay more per trade than actual best execution, which Robinhood is suppose to be legally required to deliver. The SEC in the 90s and 2000s thought the practice amounted to middle manning traders and should be illegal. Basically: Robinhood gives stock purchases to a third party, who pays Robinhood for each transaction in “rebates”. If you have a free trading account other than fidelity, you are paying insane transaction fees that are hidden from you by the pff. It’s middle manning, and Robinhood is paid to enable it. Not a fall guy, just not all the guys that need to fall.
  - croon 6y ago
    Isn't the not-so-secret secret that every other brokerage also sells flow [0], but still charges the end user? Making Robinhood just less bad than the rest. [0] https://piper2.bluematrix.com/sellside/EmailDocViewer?encrypt=6470f5cc-e225-497c-922d-e00e6188ed78&mime=pdf&co=Piper&id=FSG-ER@psc.com&source=mail https://piper2.bluematrix.com/sellside/EmailDocViewer?encryp...
  - omgJustTest 6y ago
    On the topic of trading freezes and capital requirements: there are a lot of ppl who will loan a broker money. Intersect them with the number of ppl who will and can PFF and now you are talking about 1-10orgs and most of them are high frequency middle manning the orders coming in. If you are one of the 1-10 orgs who do this 1. You’re scum and 2. You are big enough to be on both sides of this definition of the conflict of interests What happens to RH rebates if they no longer have 1-10 of those PFF customers?
  - 6y ago
cwhiz 6y ago
I don’t really care what the rules are. Arbitrarily preventing people from buying, but not selling, is market manipulation. Any company that took part in this should be dismantled. If you need to halt trading because of liquidity requirements, halt all trading.
- cortesoft 6y ago
  It wasn't arbitrary. There is huge risk for brokers when very volatile stocks are bought at heavy volume. The risk is not there when selling stock. The companies backing the risk RH was taking rightfully asked for more collateral, and RH wasn't able to come up with it. It was in no way arbitrary.
  - OJFord 6y ago
    Better, it's reduced.
  - cwhiz 6y ago
    Those rules are arbitrary, and arbitrarily enforced.
- OJFord 6y ago
  No, not allowing people to close open positions would be way more of a shit show, and way more likely to look bad (on the broker) in court.
  - cwhiz 6y ago
    Halting all trading is the only way to prevent market manipulation.
mobjack 6y ago
These lawsuits seem silly. Are investors suing for the right to be the biggest fool in a pump and dump scheme? The consequences of not buying GameStop is that the investor has more cash in their account which doesn't change in value. Most of those who would have bought around the peak would have lost a lot of money. If Robinhood prevented investors from selling their shares or closing their positions then that would be grounds to sue. Investors were exposed to an extremely volatile stock with no means to exit and could have lost everything in that scenario.
- manishsharan 6y ago
  I think you are minimizing the extent of Robinhood's perfidity. Almost all fiduciaries would have advised and blocked such trades but Robinhood can't decide to become a fiduciary on a whim. Robinhood was interfering in a decision made by a user . What if your calendar decides you shouldn't be dating a particular person ?
ojnabieoot 6y ago
Everything about this story is just so frustrating. - While the GameStop thing should be investigated and the lack of transparency criticized, Robinhood’s stated reason for halting the trades is plausible and corroborated by other people. I suspect their shadiness was because their internal finances are worse than they are letting on. The idea that they were acting as the foot soldiers of hedge funds (who were hardly overexposed to GME anyway) is preposterous. - Robinhood absolutely deserves to get in legal trouble (like “send the CEO to prison”) for its horrendously predatory “appification” of retail investment[1]. I had a poor opinion of Robinhood and I was still shocked by how horrible their behavior was[2]: > In 2019, Robinhood rolled out a new cash management feature with an early access waitlist and utilized gamification to reward customers who interacted daily with the application by improving their position on the waitlist. Customers who did not interact daily watched their position on the waitlist precipitously decline, while those who succumbed to the effects of Robinhood's gamification soared up and up the waitlist. > In an effort to encourage trading, Robinhood provides lists of securities on its application, including lists of the most-traded securities on Robinhood's platform and the most popular securities traded by Robinhood customers. This is no different than a broker-dealer agent handing a list of securities to a customer, pretending to be surprised when the customer purchases securities from that list, and then proclaiming that he made no recommendations to that customer. > Robinhood advertisements use young actors and illustrate Robinhood's attempt to lure young, inexperienced investors into using its platform...[f]or example, one such advertisement contains a clip of a young adult saying "I'm a broke college student and investments might help my future tremendously." Sincerely rotten folks at that company. [1] https://www.cnbc.com/2020/12/16/robinhood-reportedly-facing-complaint-by-massachusetts-regulators-over-targeting-young-users.html https://www.cnbc.com/2020/12/16/robinhood-reportedly-facing-... [2] https://www.sec.state.ma.us/sct/current/sctrobinhood/MSD-Robinhood-Financial-LLC-Complaint-E-2020-0047.pdf https://www.sec.state.ma.us/sct/current/sctrobinhood/MSD-Rob...
criddell 6y ago
Does the Robinhood TOS not require arbitration to settle disputes with users?
MH15 6y ago
Currently Robinhood won't send me my tax forms from 2020. I have a trivial amount of money in the account but it's the only thing preventing me from filing taxes yet. Everything else has been ready since early March.
- mtrovo 6y ago
  So ready for only 2 days?
- ry4nolson 6y ago
  did you check under your Account->Documents? They posted my 1099 mid-February.
- dlgeek 6y ago
  That's not a Robinhood thing, that's based on the investments you had in it. A lot of those have a March 1st or March 15th deadline (depending on type) to get their tax reporting done and reported back, and your broker is blocked on finalizing their forms until they finish those.
  - TameAntelope 6y ago
    Another great example of Robinhood getting blamed for things it can’t control. Being the retail face of a complex industry apparently results in you getting blamed for the complexity.
    - drone 6y ago
      One might argue that the original sin of RH is marketing to people who don't have a grasp of how these systems work and not being used to having to learn these things when dealing with a consumer product. Some of the barriers to dealing with traditional brokerages created opportunities to learn, and to put one's self into the mindset that this is a thing that is new and complex (on your first encounter), and your general approach should be researching each new thing you're trying. Heck, just the signup and annual reporting requirements on IB will make you think long and hard about each type of transaction you might want to do. I can get behind making a business out of it, but I wonder what the long-term effects of trying to gamify and consumerify stock trading is going to have on laws, regulations, and the overall market conditions going forward. (I know what RH would say, they're "levelling the playing field for the average Joe!" But, you know, Fidelity & co. did that a long time ago - they just didn't gamify it, they gave you access to it largely as it was.)
jcranmer 6y ago
I've read a couple of the lawsuits on courtlistener. From what I've read, these lawsuits are going to go absolutely nowhere. The biggest problem most of the lawsuits face is that there is a provision in the Terms of Service that basically says that Robinhood can prevent you from trading in any stock it wishes. Any complaint that amounts to "Robinhood violated its contract" is going to go down in flames as a result--it didn't violate its contract; the people who are complaining didn't read the contract. That really only leaves two kinds of claims that might have legs: arguing that Robinhood violated securities laws, and arguing conspiracy on the part of hedge funds. The first part is difficult to win on because many of the complainants will simply lack the standing to do so (you have to have owned the stocks in question and bought/sold at a manipulated price to show standing, and since the complaints are generally on the theme of "we tried to buy but couldn't", they fail that) [1]. The last one might survive until discovery if properly pled, but I sincerely doubt they'll ever eventually win it. [1] One of the cases filed for a temporary restraining order mainly on the basis of the complaint. The judge found that the briefing didn't even meet the "raises serious questions" burden of proof, although they mentioned that the TRO failed really hard at the "suffered irreparable harm" part because losing money is pretty much by definition a reparable harm.
- rkagerer 6y ago
  Have any claimants presented compelling arguments for the judge to throw out that contract provision?
  - jcranmer 6y ago
    In short, no, not that I've seen. However, there also hasn't particularly been much of a reason to yet--there haven't been any motions that need argumentation, and the defense (Robinhood) hasn't responded yet to the cases.
- nextaccountic 6y ago
  > That really only leaves two kinds of claims that might have legs: arguing that Robinhood violated securities laws, and arguing conspiracy on the part of hedge funds. The first part is difficult to win on because many of the complainants will simply lack the standing to do so (you have to have owned the stocks in question and bought/sold at a manipulated price to show standing, and since the complaints are generally on the theme of "we tried to buy but couldn't", they fail that) Someone that owned GME shares could argue that by restricting buying but not selling shares, Robinhood was acting to lower the value of this asset. They might argue that in this situation the only fair thing to do is to restrict buying and selling altogether.
LatteLazy 6y ago
I imagine very few have any merit. The far more damaging aspect is commercial: they're no longer the darling of r/WSB.

Fuck robinhood I hope they are bankrupted. A company with zero integrity. I lost a huge amount of money that day. I don’t mind losing fair and square .... make a bad call, lose the dough, pay the price - that’s the deal. I’m even ok with losing for reasons I don’t understand due to the concealed rigged nature of the markets. But losing my money on the same day that robinhood manipulates the market openly and publicly really felt unfair. I’d be most pleased if they went from pending 50 billion IPO to ZIPPO. Nothing for the founder and nothing for the investors. I hate this company. And remember if you’re considering opening an account with robinhood what you personally might lose by putting your money with them.

deleted 6y ago
[deleted]
vga805 6y ago
Multiple brokerages shut down buying due to the collateral requirements that were raised. Robinhood seems like the fall guy here, hopefully people start asking the right questions about the collateral and the manipulation there.
- trestenhortz 6y ago
  That is absolutely not the reason that they publicly stated they stopped allowing purchasing and only allowed selling. I’d dance on the grave of this company.
  - bidirectional 6y ago
    Well then what is the reason? I've not seen anything else. The CEO was cagey when asked about liquidity, but every official release has suggested that the collateral requirements were the problem.
  - xadhominemx 6y ago
    Actually it is the reason they stated
    - sokoloff 6y ago
      There was a several hour period one evening where some “it’s for your own good because of the volatility” message was the first comms from the company on the topic.
      - WoahNoun 6y ago
        That's not what the message said. It said "to protect our customers." Which is consistent with the capital requirements reason. If RH didn't meet the requirements, the entire company (all of their customers; even those who knew nothing about game) would go into receivership and the company unwound. Meanwhile, no one can sell their shares while this happens. Not meeting their capital requirements would have been very, very bad for all of RH's customers.
  - elefanten 6y ago
    Who cares? Companies rush out dumb comms under pressure then walk em back or change them. They're not obligated to stick to the first thing they said on a topic -- especially when it's customer comms. It's not a good source for answering what they did / why they did it.
- kmlx 6y ago
  other brokerages simply put up the money. this meant that while huge swaths of the retail investors in the US (and parts of Europe) were not allowed to buy GME, other retail investors had no issues. to top it off, certain brokerages only allowed sell orders. this meant a huge imbalance in the market. i really don’t get how this is legal and why heads aren’t rolling. case in point: saxo bank let me trade GME without an issue. but since most brokerages did not put up the new collateral, and only allowed sell... basically this is a case of market manipulation by way of changing the rules in realtime. i get why they changed the rules, i don’t get why the SEC is not removing the authorisation of the participants in this scheme and also not prosecuting the companies. i’m clearly missing some info here and need to read some more on this subject.
  - joncrane 6y ago
    >other brokerages simply put up the money. Nope, multiple other brokerages including Interactive Brokers also suspended options trading and opening any new positions in the so-called "meme" stocks.
  - bidirectional 6y ago
    So what are you proposing? All brokerages must put up the collateral no matter what? Surely it is up to the individual businesses whether they can afford to, want to take the risk, etc.
    - tedunangst 6y ago
      Some people seem to be suggesting that when RH got the collateral call for funds they didn't have on hand, they should have instantly gone into receivership and wound the whole operation down, closing all accounts. Or something like that. They probably don't mean that, but it's the logical conclusion of what they're saying. Always have the required collateral or face instant annihilation.
  - gruez 6y ago
    >other brokerages simply put up the money ...assuming they had the money. On the day they suspended trading, they also raised $2B in funding the same night. A few days later they partially unrestricted trading.
lugorrr 6y ago
I can only recommend reading this [1] digest. [1] https://blog.bitmex.com/walkaway/ https://blog.bitmex.com/walkaway/
dmos62 6y ago
For the record, why did Robinhood stop the trading? I know there's been an uproar, but due to the volume of articles it's been difficult to get a clearheaded idea of why Robinhood actually did it.
- SalimoS 6y ago
  There is an episode on NPR https://www.npr.org/2021/02/02/963466346/robinhoods-very-bad-day https://www.npr.org/2021/02/02/963466346/robinhoods-very-bad...
- trestenhortz 6y ago
  They’ve removed the original blog post that gave their rationale. If anyone can find it I’d like to read it again. The original reason was some bullshit about protecting investors from volatility.
- a254613e 6y ago
  Liquidity issue. Or rather, extremely close to it. The CEO said he "doesn't want to use the L word" to describe it. Basically they had to cover/deposit the purchase trades themselves, before they ran out of money to do so (liquidity issue) they shut down purchasing - then went on record on CNBC etc claiming that it's not a liquidity issue. Interview with the CEO https://youtu.be/LqoJApzkaPU?t=404 https://youtu.be/LqoJApzkaPU?t=404 where he confirms that's the case
  - deleted 6y ago
    [deleted]
- dmos62 6y ago
  To answer my own question: quoting https://blog.bitmex.com/walkaway/ https://blog.bitmex.com/walkaway/ > "Brokers must post margin with the Depository Trust & Clearing Corporation and National Securities Clearing Corporation at the end of each day to ensure enough funds are reserved to cover any trading losses." > The “meme” stonks’ volatility skyrocketed, which meant that the clearing organisations could ask for more collateral from brokers on the grounds of needing to protect themselves from additional potential risk when settling the brokers’ trades. It takes two business days to settle stocks in the so-called digital age… > Robinhood in particular was told to come up with $4 billion, or they would not be able to facilitate any trading the following day. RH, apparently not having that much cash on-hand, said, “how about we stop trading or severely curtail trading in the stocks that are causing PAIN to various masters of the universe?” The clearing houses said, “OK, in that case, you would only need to post $700 million.” RH agreed to that figure, rushed to raise more money from the Street and/or Silicon Valley, and then subsequently shut off trading on Jan 28th and into the weekend. (This is information gleaned from an interview the CEO of RH gave to Elon Musk on Clubhouse). So, it's the clearing houses that strongarmed shutting down the trading.

say_it_as_it_is 6y ago

.. and almost ten ongoing movie, television and documentary projects about the GameStop fiasco

victords 6y ago
Why fiasco?

VoodooJuJu 6y ago

I'm pretty skeptical of the negative attention Robinhood is receiving. It seems like the entities who actually acted in bad faith, the ones who attempted illegal shorts, are trying to divert attention. Like someone else said, Robinhood is just the fall guy here.

omgJustTest 6y ago
Hard to hear. Robinhood has normalized pay for flow, a service that is literally shaving cash off each order in exchange for “free trading”. Pff can only generate net revenue by making traders pay more per trade than actual best execution, which Robinhood is suppose to be legally required to deliver. The SEC in the 90s and 2000s thought the practice amounted to middle manning traders and should be illegal. Basically: Robinhood gives stock purchases to a third party, who pays Robinhood for each transaction in “rebates”. If you have a free trading account other than fidelity, you are paying insane transaction fees that are hidden from you by the pff. It’s middle manning, and Robinhood is paid to enable it. Not a fall guy, just not all the guys that need to fall.
- croon 6y ago
  Isn't the not-so-secret secret that every other brokerage also sells flow [0], but still charges the end user? Making Robinhood just less bad than the rest. [0] https://piper2.bluematrix.com/sellside/EmailDocViewer?encrypt=6470f5cc-e225-497c-922d-e00e6188ed78&mime=pdf&co=Piper&id=FSG-ER@psc.com&source=mail https://piper2.bluematrix.com/sellside/EmailDocViewer?encryp...
- omgJustTest 6y ago
  On the topic of trading freezes and capital requirements: there are a lot of ppl who will loan a broker money. Intersect them with the number of ppl who will and can PFF and now you are talking about 1-10orgs and most of them are high frequency middle manning the orders coming in. If you are one of the 1-10 orgs who do this 1. You’re scum and 2. You are big enough to be on both sides of this definition of the conflict of interests What happens to RH rebates if they no longer have 1-10 of those PFF customers?
- 6y ago

cwhiz 6y ago

I don’t really care what the rules are. Arbitrarily preventing people from buying, but not selling, is market manipulation. Any company that took part in this should be dismantled. If you need to halt trading because of liquidity requirements, halt all trading.

cortesoft 6y ago
It wasn't arbitrary. There is huge risk for brokers when very volatile stocks are bought at heavy volume. The risk is not there when selling stock. The companies backing the risk RH was taking rightfully asked for more collateral, and RH wasn't able to come up with it. It was in no way arbitrary.
- OJFord 6y ago
  Better, it's reduced.
- cwhiz 6y ago
  Those rules are arbitrary, and arbitrarily enforced.
OJFord 6y ago
No, not allowing people to close open positions would be way more of a shit show, and way more likely to look bad (on the broker) in court.
- cwhiz 6y ago
  Halting all trading is the only way to prevent market manipulation.

mobjack 6y ago

These lawsuits seem silly. Are investors suing for the right to be the biggest fool in a pump and dump scheme? The consequences of not buying GameStop is that the investor has more cash in their account which doesn't change in value. Most of those who would have bought around the peak would have lost a lot of money. If Robinhood prevented investors from selling their shares or closing their positions then that would be grounds to sue. Investors were exposed to an extremely volatile stock with no means to exit and could have lost everything in that scenario.

manishsharan 6y ago
I think you are minimizing the extent of Robinhood's perfidity. Almost all fiduciaries would have advised and blocked such trades but Robinhood can't decide to become a fiduciary on a whim. Robinhood was interfering in a decision made by a user . What if your calendar decides you shouldn't be dating a particular person ?

ojnabieoot 6y ago

Everything about this story is just so frustrating. - While the GameStop thing should be investigated and the lack of transparency criticized, Robinhood’s stated reason for halting the trades is plausible and corroborated by other people. I suspect their shadiness was because their internal finances are worse than they are letting on. The idea that they were acting as the foot soldiers of hedge funds (who were hardly overexposed to GME anyway) is preposterous. - Robinhood absolutely deserves to get in legal trouble (like “send the CEO to prison”) for its horrendously predatory “appification” of retail investment[1]. I had a poor opinion of Robinhood and I was still shocked by how horrible their behavior was[2]: > In 2019, Robinhood rolled out a new cash management feature with an early access waitlist and utilized gamification to reward customers who interacted daily with the application by improving their position on the waitlist. Customers who did not interact daily watched their position on the waitlist precipitously decline, while those who succumbed to the effects of Robinhood's gamification soared up and up the waitlist. > In an effort to encourage trading, Robinhood provides lists of securities on its application, including lists of the most-traded securities on Robinhood's platform and the most popular securities traded by Robinhood customers. This is no different than a broker-dealer agent handing a list of securities to a customer, pretending to be surprised when the customer purchases securities from that list, and then proclaiming that he made no recommendations to that customer. > Robinhood advertisements use young actors and illustrate Robinhood's attempt to lure young, inexperienced investors into using its platform...[f]or example, one such advertisement contains a clip of a young adult saying "I'm a broke college student and investments might help my future tremendously." Sincerely rotten folks at that company. [1] https://www.cnbc.com/2020/12/16/robinhood-reportedly-facing-complaint-by-massachusetts-regulators-over-targeting-young-users.html https://www.cnbc.com/2020/12/16/robinhood-reportedly-facing-... [2] https://www.sec.state.ma.us/sct/current/sctrobinhood/MSD-Robinhood-Financial-LLC-Complaint-E-2020-0047.pdf https://www.sec.state.ma.us/sct/current/sctrobinhood/MSD-Rob...

criddell 6y ago

Does the Robinhood TOS not require arbitration to settle disputes with users?

MH15 6y ago

Currently Robinhood won't send me my tax forms from 2020. I have a trivial amount of money in the account but it's the only thing preventing me from filing taxes yet. Everything else has been ready since early March.

mtrovo 6y ago
So ready for only 2 days?
ry4nolson 6y ago
did you check under your Account->Documents? They posted my 1099 mid-February.
dlgeek 6y ago
That's not a Robinhood thing, that's based on the investments you had in it. A lot of those have a March 1st or March 15th deadline (depending on type) to get their tax reporting done and reported back, and your broker is blocked on finalizing their forms until they finish those.
- TameAntelope 6y ago
  Another great example of Robinhood getting blamed for things it can’t control. Being the retail face of a complex industry apparently results in you getting blamed for the complexity.
  - drone 6y ago
    One might argue that the original sin of RH is marketing to people who don't have a grasp of how these systems work and not being used to having to learn these things when dealing with a consumer product. Some of the barriers to dealing with traditional brokerages created opportunities to learn, and to put one's self into the mindset that this is a thing that is new and complex (on your first encounter), and your general approach should be researching each new thing you're trying. Heck, just the signup and annual reporting requirements on IB will make you think long and hard about each type of transaction you might want to do. I can get behind making a business out of it, but I wonder what the long-term effects of trying to gamify and consumerify stock trading is going to have on laws, regulations, and the overall market conditions going forward. (I know what RH would say, they're "levelling the playing field for the average Joe!" But, you know, Fidelity & co. did that a long time ago - they just didn't gamify it, they gave you access to it largely as it was.)

jcranmer 6y ago

I've read a couple of the lawsuits on courtlistener. From what I've read, these lawsuits are going to go absolutely nowhere. The biggest problem most of the lawsuits face is that there is a provision in the Terms of Service that basically says that Robinhood can prevent you from trading in any stock it wishes. Any complaint that amounts to "Robinhood violated its contract" is going to go down in flames as a result--it didn't violate its contract; the people who are complaining didn't read the contract. That really only leaves two kinds of claims that might have legs: arguing that Robinhood violated securities laws, and arguing conspiracy on the part of hedge funds. The first part is difficult to win on because many of the complainants will simply lack the standing to do so (you have to have owned the stocks in question and bought/sold at a manipulated price to show standing, and since the complaints are generally on the theme of "we tried to buy but couldn't", they fail that) [1]. The last one might survive until discovery if properly pled, but I sincerely doubt they'll ever eventually win it. [1] One of the cases filed for a temporary restraining order mainly on the basis of the complaint. The judge found that the briefing didn't even meet the "raises serious questions" burden of proof, although they mentioned that the TRO failed really hard at the "suffered irreparable harm" part because losing money is pretty much by definition a reparable harm.

rkagerer 6y ago
Have any claimants presented compelling arguments for the judge to throw out that contract provision?
- jcranmer 6y ago
  In short, no, not that I've seen. However, there also hasn't particularly been much of a reason to yet--there haven't been any motions that need argumentation, and the defense (Robinhood) hasn't responded yet to the cases.
nextaccountic 6y ago
> That really only leaves two kinds of claims that might have legs: arguing that Robinhood violated securities laws, and arguing conspiracy on the part of hedge funds. The first part is difficult to win on because many of the complainants will simply lack the standing to do so (you have to have owned the stocks in question and bought/sold at a manipulated price to show standing, and since the complaints are generally on the theme of "we tried to buy but couldn't", they fail that) Someone that owned GME shares could argue that by restricting buying but not selling shares, Robinhood was acting to lower the value of this asset. They might argue that in this situation the only fair thing to do is to restrict buying and selling altogether.

LatteLazy 6y ago

I imagine very few have any merit. The far more damaging aspect is commercial: they're no longer the darling of r/WSB.