Robinhood Markets was hit by at least two customer lawsuits after restricting transactions on stocks includingGameStop Inc. following a frenzied runup driven by Reddit-inspired traders.
Robinhood was named as a defendant in federal lawsuits filed in Manhattan and Chicago on Thursday.
In the New York suit, Robinhood user Brendon Nelson, of Massachusetts, said the company removed GameStop from its trading platform in the midst of an “unprecedented stock rise,” depriving individual investors of the ability to invest and manipulating the market. The decision was a breach of its customer agreement and was in violation of financial industry rules, according to the complaint.
In the Chicago suit, user Richard Joseph Gatz, of Naperville, Illinois, said the halt of trading in Blackberry, Nokia and AMC Theatres “was to protect institutional investment at the detriment of retail customers” and is in “lockstep” with other trading platforms.
“The halt of retail trading for these stocks has caused irreparable harm and will continue to do so,” Gatz said. “Plaintiff is unable to get fair market value for his options contracts,” and “if the stocks are not allowed to be trading it is likely that plaintiff will take a financial loss solely due to the defendant’s behavior and manipulation of their trading platform.”
Robinhood didn’t immediately respond to a request for comment on the suits.
A group ofmaverick, digitally oriented traders who gather in Reddit’s WallStreetBets forum have forced hedge funds to back down from wagers that GameStop Corp. shares would fall. Their efforts sent shares of the video-game retailer soaring, making millionaires out of some of them along the way, while inflicting major losses on the establishment.
— With assistance by Misyrlena Egkolfopoulou, and Olga Kharif
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