Robinhood Faces Lawsuits After Restricting Users’ Ability to Purchase Certain Stock
From the Desk of Jim Eccleston at Eccleston Law LLC:
On January 29, 2021, in the midst of increased trading and extreme volatility on certain stocks, including GameStop Inc., Robinhood restricted its users’ ability to trade those stocks. GameStop stock, which was trading around $19 at the end of 2020, peaked at more than $500 per share this week. While Robinhood would allow its users to sell their position in those stocks, users were unable to purchase the stock. Robinhood’s trade restrictions was widely discussed, including in tweets from U.S. Representative Alexandria Ocasio-Cortez and Senator Ted Cruz.
Robinhood is now the subject of at least two federal lawsuits, filed in Manhattan and Chicago, ChicagoBusiness.com reported. The Manhattan lawsuit was filed by Brendon Nelson, a Robinhood user from Massachusetts. Nelson alleged that Robinhood’s conduct breached its customer agreement a violated industry rules.
In Chicago, Richard Joseph Gatz filed a lawsuit against Robinhood. Gatz alleged that Robinhood also prohibited users trading stock in Blackberry, Nokia, and AMC Theaters. According to Gatz’s lawsuit, Robinhood’s conduct was designed “to protect institutional investment at the detriment of retail customers.”
Robinhood was not the only online brokerage to restrict users’ ability to trade certain stocks. Interactive Brokers Group Inc. and E*Trade also restricted trading of GameStop stock. Additionally, Fidelity, Schwab and TD Ameritrade experienced technical problems.
Eccleston Law is investigating claims by investors that have been impacted by this situation. Call us today.
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