Investment app Robinhood is facing 30 lawsuits after restricting the trading of certain stocks, court records show, according to the Wall Street Journal.
Investors have filed lawsuits in federal courts across several states, including New Jersey, Florida, California, Texas, the Wall Street Journal reported Wednesday. The complaints allege that the company breached its contract when it restricted the trade of some stocks on its app. (RELATED: Robinhood Has Received Billions From Silicon Valley Investors)
Reddit users on r/WallStreetBets drove up the price of Gamestop over 600% after discovering that the stock had been heavily shorted by hedge funds, meaning they were betting that the price of the stock would go down. After hedge funds lost billions of dollars, Robinhood announced that they were restricting users from buying Gamestop, AME, Blackberry and other stocks on its app.
Robinhood is facing more than 30 civil lawsuits in relation to trading restrictions it imposed last week to temporarily limit purchases of certain securities https://t.co/fmXSP8Ubi7
— The Wall Street Journal (@WSJ) February 3, 2021
Restricting trades drew bipartisan criticism from people who said Robinhood was only restricting trade to help hedge funds and Wall Street investors. The company said in a blog post that the restrictions were so that the company could meet the SEC’s clearinghouse requirements.
One of the complaints, a class-action lawsuit which was filed in the Southern District of New York, alleges that Robinhood violated its Customer Agreement by pulling certain stocks without adequate explanation and limiting customers from potential gains. (RELATED: REPORT: Google Deleted Nearly 100,000 Negative Ratings From Robinhood)
Another lawsuit, which was filed Thursday in the Northern District of California, claims that removing the option to buy certain stocks was done in order to benefit individuals and institutions that weren’t Robinhood’s customers and prevented Robinhood users from investing in an open market, the Wall Street Journal reported.
“We look forward to seeking justice for consumers and holding Robinhood to account for its conduct last week,” Jason Rathod, a lawyer at Migliaccio & Rathod LLP representing the plaintiffs, told the Wall Street Journal. “So far, Robinhood has deflected responsibility, and acted as if external forces beyond its control are responsible for suspending trading. These excuses ring hollow.”