Robinhood sued by customers for restricting GameStop trading
Reddit-driven investment had seen stock price spike 700 per cent in just days
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Your support makes all the difference.Robinhood customers have sued the stock trading firm after it restricted the Reddit-driven trading frenzy surrounding GameStop.
Robinhood was named as defendant in a pair of federal lawsuits filed by disgruntled customers in New York and Chicago.
The legal action came after the company on Thursday that in that some cases amateur investors would only be able to sell their positions and not open new ones.
The unusual move came as a reaction to the wild investment in GameStop that has piled up huge losses for hedge funds and Wall Street investors with short positions.
GameStop’s share price, which at the beginning of the year was $20, had spiked 700 per cent over the past two weeks to more than $500.
The stock price dropped down to around $126 before clawing back some of its gains during Thursday morning trading.
Other heavily shorted stocks targetted by the Reddit investors includes AMC, Blackberry and Koss.
In the New York lawsuit, Robinhood user Brendon Nelson, of Massachusetts, said the company had removed GameStop from its trading platform during an “unprecedented stock rise.”
The lawsuit claims that Robinhood prevented individual investors of their ability to invest and manipulated the market.
It states that their decision was a breach of the customer agreements and violation of financial industry rules.
In the Chicago lawsuit, Richard Joseph Gatz, of Naperville, Illinois, claims that Robinhood halting the trading of Blackberry, Nokia and AMC “was to protect institutional investment at the detriment of retail customers.”
Robinhood said they had acted “in light of recent volatility.”
“We continuously monitor the markets and make changes where necessary. In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AAL, $AMC, $BB, $BBBY, $CTRM, $EXPR, $GME, $KOSS, $NAKD, $NOK, $SNDL, $TR and $TRVG. We also raised margin requirements for certain securities,” said Robinhood in a statement.
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