Class-action lawsuit to be filed against Robinhood following stock trading restriction furor
Arizona lawyer to file class-action lawsuit following furor over stock trading restrictions
Plaintiffs in the lawsuit say the stock trading app Robinhood essentially violated its Terms of Service, which promises an open market, by restricting trading on GameStop.
PHOENIX - The stock market was certainly shaken up this week when a number of Reddit users purchased call options for GameStop stocks, leading that stock to reach levels it hasn’t been at in years.
Since then, a trading app called Robinhood has limited buying options for that stock, leading some smaller investors to file a class-action lawsuit.
About 100 people are taking part in that class-action lawsuit. They are accusing officials at Robinhoof of essentially violating its Terms of Service agreement to maintain an open market by placing the restrictions.
The tale of Robin Hood is a classic one: that of stealing from the rich and giving it to the poor. It’s a concept that Valley attorney Gabriel Vadasz says certainly won’t fly in the stock market.
"Volume drives everything, so people with hedge funds, in a position with billions of dollars, they can drive the price whichever direction they want," said Vadaz.
Vadasz says officials with the Robinhood app made promises of catering to smaller investors, including in their terms of service an open market policy.
This week, a number of Reddit users banded together to purchase call options for GameStop, leading the stock prices to soar, reaching nearly $400 by the end of the day on Jan. 27.
After that, Robin hood restricted trading for those stocks.
"A lot of smaller investors ended up hurt because of this," said Vadasz.
Vadasz has since established the class-action lawsuit. One of the people signing onto the lawsuit is Austin Syr.
Syr says he himself tried to buy stock in GameStop on Jan. 28, using the Robinhood app. Syr, however, was not allowed to do so.
"Their name is Robinhood, so to have a situation now where it is somewhat the opposite of their original intent, it makes me question if this is a partner to trust," said Syr.
Officials with Robinhood have since said that it would resume limited purchasing options on Jan. 29. Officials with the company have said they only made these restrictions to comply with capital requirements for broker-dealers.