Robinhood App Hit With Class Action Suit After Trying to Shut Down GameStop Uprising

Arya Hodjat
Michael M. Santiago/Getty
Michael M. Santiago/Getty

The financial trading app Robinhood is been hit with a federal class action lawsuit after it restricted trades to stocks popular on the Reddit forum r/WallStreetBets.

The lawsuit, filed in the Southern District of New York on Thursday, alleges that the app “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.”

Alexander G. Cabeceiras, the attorney who filed the suit, tweeted shortly after: “‘Robinhood’s mission is to democratize finance for all.’ 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, attorney’s fees, and punitive damages.

Another law firm, ChapmanAlbin, said in a statement Thursday that it was “investigating claims on behalf of Robinhood users that were affected and suffered losses as a result of investing in Gamestop or AMC.”

“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,” ChapmanAlbin attorney Philip Vujanov said in the statement. The firm didn’t immediately respond to The Daily Beast’s request for comment.

Users of r/WallStreetBets had helped pump up the stock prices of struggling companies, most famously GameStop, as a counter to short-selling investment strategies. Through the subreddit’s campaign, GameStop’s stock ($GME) went from under $4 a share in early 2020 to well over $400 earlier on Thursday.

However, on Thursday morning, Robinhood restricted further trading of $GME—along with other stocks popular in the Reddit forum, such as BlackBerry, Nokia, and AMC—only allowing users to close out of their positions.

Redditors responded with rage. Users of r/WallStreetBets created a separate forum, r/ClassActionRobinHood, to coordinate a possible lawsuit against the app. The subreddit had racked up over 10,000 subscribers as of Thursday afternoon. It is unclear whether this lawsuit is linked to the subreddit. The creator of the forum did not immediately respond to The Daily Beast’s request for comment.

He Joined the GameStop Uprising to Screw the Big Guys—and Save His Dog’s Life

Also on Thursday, Rep. Alexandria Ocasio-Cortez (D-NY), a member of the House Financial Services Committee, said she would “support a hearing if necessary” into Robinhood’s actions.

“We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit,” she wrote on Twitter.

Sen. Ted Cruz (R-TX) responded, “Fully agree.”

More to come

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