Popular millennial trading app Robinhood has been hit by a pair of customer lawsuits following restrictions placed on GameStop (GME) stock trading.
The suits, filed in Manhattan and Chicago, follow a wild few days for the app, and for the ailing video game retailer. GameStop’s stock price rose over 400% this week, as Reddit users on the r/wallstreetbets message board launched a coordinated effort to squeeze short-sellers.
Melvin Capital, a hedge fund, received an almost $3 billion bailout from two other hedge funds after closing out its GameStop shorts.
Robinhood blocked customers from purchasing more GameStop stock earlier this morning, which sent the price up to over $400 a share, and tanked it shortly thereafter.
Lol Robinhood Google reviews down to 1 star. What a way to kill a brand overnight. pic.twitter.com/iYQxL4yGlb
— Dr. Parik Patel, BA, CFA, ACCA Esq. 💸 (@ParikPatelCFA) January 28, 2021
The Manhattan lawsuit claims that “Robinhood purposefully, willfully, and knowingly removing the stock 'GME' from its trading platform in the midst of an unprecedented stock rise thereby deprived retail investors of the ability to invest in the open-market and manipulating [sic] the open-market.”
Rep. Rashida Tlaib referred to Robinhood’s actions as “market manipulation” in a tweet, and called for a hearing with the House Financial Services Committee.
This is beyond absurd. @FSCDems need to have a hearing on Robinhood's market manipulation. They're blocking the ability to trade to protect Wall St. hedge funds, stealing millions of dollars from their users to protect people who've used the stock market as a casino for decades. https://t.co/CGkJxVfzkv
— Rashida Tlaib (@RashidaTlaib) January 28, 2021
Rep. Alexandria Ocasio-Cortez agreed, writing, “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.”
This is unacceptable.
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.
As a member of the Financial Services Cmte, I’d support a hearing if necessary. https://t.co/4Qyrolgzyt
— Alexandria Ocasio-Cortez (@AOC) January 28, 2021
Even Sen. Ted Cruz seemed to echo the progressive lawmakers’ concerns:
Fully agree. 👇 https://t.co/rW38zfLYGh
— Ted Cruz (@tedcruz) January 28, 2021
Since launching in 2015, Robinhood has been among the buzziest startups at the intersection of finance and tech. Beyond stocks, the app also allows its users to buy and sell cryptocurrencies, including Bitcoin, Ethereum, and Dogecoin.
The company has plans to go public this year in one of the most anticipated IPOs of 2021—at an estimated valuation of $20 billion. It's unclear what the GameStop situation, and the response from its users, might mean for those plans.