Robinhood slapped with lawsuit after restricting trading
January 29, 2021
Robinhood has been hit with a class-action lawsuit after it restricted trading of certain companies' stocks on its mobile app, drawing the ire of millions of retail investors.
Robinhood's trading app became popular among Reddit users who were behind a recent effort to drive up the price of certain stocks shorted by hedge funds. That effort has led to extreme stock market volatility over the past several days. On Thursday morning, Robinhood restricted trading in the stock of 13 companies, including GameStop, AMC Entertainment and BlackBerry, only allowing users to close out their positions. Robinhood co-founder Vladimir Tenev later tweeted that the app would allow limited buys of those companies' stocks Friday.
Other major online brokerages such as Charles Schwab's TD Ameritrade and Interactive Brokers Group also restricted trading of certain companies' stocks.
The lawsuit, filed in the Southern District of New York, claims that by restricting retail investors' access to trading amid a meteoric stock-price rise in companies like GameStop and AMC, Robinhood manipulated the open market. Several other federal lawsuits have reportedly been filed against Robinhood.
The stock kerfuffle has also drawn the eyes of several lawmakers. Rep. Alexandria Ocasio-Cortez of New York tweeted about the need to know more about Robinhood's decision to curb trading. And lawmakers in the House and Senate have pledged to hold hearings on the recent market occurrences.
Robinhood's trading app became popular among Reddit users who were behind a recent effort to drive up the price of certain stocks shorted by hedge funds. That effort has led to extreme stock market volatility over the past several days. On Thursday morning, Robinhood restricted trading in the stock of 13 companies, including GameStop, AMC Entertainment and BlackBerry, only allowing users to close out their positions. Robinhood co-founder Vladimir Tenev later tweeted that the app would allow limited buys of those companies' stocks Friday.
Other major online brokerages such as Charles Schwab's TD Ameritrade and Interactive Brokers Group also restricted trading of certain companies' stocks.
The lawsuit, filed in the Southern District of New York, claims that by restricting retail investors' access to trading amid a meteoric stock-price rise in companies like GameStop and AMC, Robinhood manipulated the open market. Several other federal lawsuits have reportedly been filed against Robinhood.
The stock kerfuffle has also drawn the eyes of several lawmakers. Rep. Alexandria Ocasio-Cortez of New York tweeted about the need to know more about Robinhood's decision to curb trading. And lawmakers in the House and Senate have pledged to hold hearings on the recent market occurrences.