The investment app Robinhood was issued a class-action lawsuit Thursday morning by an investor from Massachusetts for “randomly pulling a profitable stock from its platform.”
Users of the subreddit WallStreetBets organized a mass buying of GameStop stock this week to effectively facilitate a massive transfer of wealth from Wall Street hedge funds to the people.
However, Robinhood banned the purchase of GME (GameStop) stock Thursday morning along with several others which Reddit users had targeted including AMC, BB (Blackberry), and Nokia in a move many are calling illegal market manipulation.
For most of the year, one share of GME was worth about $5-20 per share. On Wednesday, the stock jumped from $132.33 to $310.69 overnight, eventually briefly reaching an all-time high of $467.50 Thursday morning. After the ban, GME dropped to a low of $132 before closing out at $216.60. After hours trading shows a slight increase to roughly $260.
“Robinhood essentially abandoned its customers altogether by pulling GME, a standard of care so far below what is required for a business engaging in time sensitive trading services that it amounts to a complete abandonment of its duties,” says the complaint.
Robinhood notified users Wednesday that market volatility made AMC and GME stocks risky, but did not notify users that it would be ‘restricting transactions’ of those stocks until Thursday morning in a blog post.
According to documents obtained by TMZ, a Robinhood user from Illinois is suing the company for damages as well, alleging that they “continued to allow investment in these securities by institutional investors who have benefited from the stoppage of retail investment” while barring everyday users from the trade.
Users of the WallStreetBets subreddit have been discussing a larger class-action lawsuit against the investment firm after the GME ban affected millions of users. Robinhood users are also reporting that the brokerage app has sold shares of their GME stock without their consent.
In a statement released Thursday afternoon, Robinhood announced that it will begin allowing “limited buys” of GME stock starting Friday morning.
Starting tomorrow, we plan to allow limited buys of these securities. We’ll continue to monitor the situation and may make adjustments as needed.
To be clear, this was a risk-management decision, and was not made on the direction of the market makers we route to.
We stand in support of our customers and the freedom of retail investors to shape their own financial future. Democratizing finance has been our guiding star since our earliest days. We will continue to build products that give more people—not fewer—access to our financial system. – Robinhood
This is not the first time Robinhood has been in the midst of legal trouble. In December of 2020, the company was fined $65 million by the Securities and Exchange Commission (SEC) for misleading its customers as to how it made revenue from their trades.
Robinhood is now “fully transparent in our communications with customers about our current revenue streams,” said a company spokesperson.
A lawsuit was also filed one day prior against the company for targeting young and inexperienced investors with “frequent, risky, and unsuitable trading” as well as “failing to implement policies and procedures reasonably designed to prevent and respond to outages and disruptions on its trading platforms.”
“This is no longer about money; it’s about sending a message,” one Reddit user exclaimed.
Phillip Schneider is a staff writer for Waking Times and Blacklisted News. If you want to see more of his work, you can like his Facebook Page, follow him on the free speech social network Minds, or become a contributor via Patreon.
This article (Investors Issue Class-Action Lawsuits Against Robinhood Over Gamestop Stock Trading Ban) originally appeared at Phillip Schneider and may be re-posted freely with proper attribution, author credit, and this copyright statement.
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