Robinhood, a stocks app for amateur traders, is being sued for restricting stock sales of companies like AMC and GameStop, amid the current uprising of Reddit-based traders. According to The Daily Beast, the lawsuit was filed in the Southern District of New York on Thursday, the same day that Robinhood announced that it was halting all user stock trades for the aforementioned companies, as well as a number of others. "We continuously monitor the markets and make changes where necessary. In light of recent volatility," read a statement from the company. "We are restricting transactions for certain securities to position closing only."
The class-action lawsuit alleges that the Robinhood "purposefully, willfully, and knowingly removing the stock 'GME' from its trading platform in the midst of an unprecedented stock rise, thereby deprived [sic] retail investors of the ability to invest in the open-market and manipulating the open-market." The lawsuit was filed by attorney Alexander G. Cabeceiras, who blasted the company's mission statement, "democratize finance for all," saying that "this is simply not true." The lawsuit is seeking reinstatement of $GME trading to the platform, as well as a class action fee for plaintiffs, punitive damages, attorney's fees.
This morning I filed a class action lawsuit against Robinhood for negligence and breach of fiduciary duty, among other claims. NELSON v. ROBINHOOD FINANCIAL LLC et al, 1:21-cv-00777. In Robinhood's own words "Let the People Trade." @wallstreetbets— Alex Cabeceiras (@AGCabeceirasEsq) January 28, 2021
Another law firm, ChapmanAlbin, also indicated that it too could possibly be bringing a lawsuit against the stock trading company. In a statement, ChapmanAlbin attorney Philip Vujanov said that the firm was "investigating claims on behalf of Robinhood users that were affected and suffered losses as a result of investing in Gamestop or AMC." He added, "Robinhood appears to be up to the same old tricks, recruiting social media influencers to encourage individuals to sign up and fund a Robinhood account and beginning purchasing shares of securities such as Gamestop and AMC, with no consideration as to the suitability of the purchases."
Criticism of Robinhood has been widespread over the past several hours, with many politicians also taking a firm stance on what the company appeared to be doing. Sen. Ted Cruz and Rep. Alexandria Ocasio-Cortez have both expressed interest in Robinhood's method's being investigated. Ocasio-Cortez stated that she would like to "know more about [Robinhood's] decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit." Cruz echoed her statement in agreement.