Robinhood Now Faces More Than 30 Class-Action Lawsuits Over GameStop Row
The GameStop stock surge had serious ramifications for Wall Street, and investment company Robinhood is now facing 30 class-action lawsuits for restricting user activity.
Members of the public who took advantage of short-sell stock in GameStop managed to gain money fast and leave Wall Street out of pocket. In response to this unexpected change in the free market, investment app Robinhood began restricting access to GameStop stocks, citing that the decision was ‘based on volatility in the markets’.
As a result of its intervention, Robinhood now faces 30 class-action lawsuits.
The complaints use evocative language when explaining the actions of the investment application.
One complaint that was filed by Browne George Ross O’Brien Annaguey & Ellis LLP stated that ‘Robinhood (and Apex Clearing Corporation) stole from the poor to give to the rich’. Others had similar grievances, claiming that their clients had lost potential financial gain and as a result were looking for compensation.
Despite the mounting cases, the terms and conditions in the Robinhood app may protect the company. The terms note that the company has the right to freeze stock purchases without any prior notice. Given that users will have had to agree to these terms, they may struggle to build a compelling case against the company.
8 days agoThe investment company has also provided a reason for suspending investments that isn’t purely reliant on the terms and conditions of its service.
In a blog post, Robinhood explained why it stopped trading:
The amount required by clearinghouses to cover the settlement period of some securities rose tremendously this week. How much? To put it in perspective, this week alone, our clearinghouse-mandated deposit requirements related to equities increased ten-fold.
And that’s what led us to put temporary buying restrictions in place on a small number of securities that the clearinghouses had raised their deposit requirements on. It was not because we wanted to stop people from buying these stocks.
It is clear that users are angry with Robinhood, and they have even expressed themselves through scathing Google reviews. Despite this, it seems that the investment company will be able to navigate the multiple lawsuits that it faces. With that said, whether it will be able to maintain an audience after recent events remains to be seen.
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