A Naperville lawyer has made national headlines suing Robinhood Financial, LLC for an estimated $75,000 over claims of market manipulation.
Richard Gatz claims in the federal lawsuit to have incurred significant losses due to Robinhood’s decision to restrict trading of AMC Entertainment Holdings, Inc, Nokia Oyj, and BlackBerry Ltd.
Alleged Market Manipulation
On January 28, 2021 Robinhood, a trading app that states its goal is to “democratize finance for all,” sent a message to its roughly 13 million users detailing the platform’s halting of buy orders on volatile stocks. The message’s subject title read: “Due to ongoing volatility, some securities like AMC and GME are position-closing only.” Included on the list of restricted stocks were AMC, Nokia, BlackBerry and GameStop.
From Gatz’s lawsuit:
“The Defendant halted trading on its securities exchange platform of Blackberry (BB), Nokia (NOK), and AMC Theatres (AMC) for retail investors. On information and belief, they have continued to allow trading for institutional investors. Richard Joseph Gatz (hereinafter referred to as the “Plaintiff”) owned two (2) options contracts for BB at the time of the trading halt. The value of these options decreased by almost two-hundred percent and the BB stock price fell over ten dollars ($10) from the prior days close. On information and belief, the halting of trading of these stocks was to protect institutional investment at the detriment of retail customers. Furthermore, this appears to be in lock-step with other securities trading platforms, such as Ally Financial, TD Ameritrade and potentially others.”
Lead Up to Naperville Lawyer’s Suit
Robinhood’s restrictions on trading came after GameStop stock gained attention, having shot from $19.95 a share to $469 by 10 a.m. on January 28.
For a week, members of a popular Reddit channel, WallStreetBets, have been collectively driving up the price of individual stocks – mostly those of companies who seem to have reached their peak value years ago and have seen declining value in the current digital-centric landscape. The move was an effort to combat hedge fund investors who were short selling shares.
More Lawsuits, Pressure
In addition to individual suits filed against financial institutions, like Gatz’s suit against Robinhood, many lawmakers and influential figures in the finance world have cried foul.
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
Fully agree. 👇 https://t.co/rW38zfLYGh
— Ted Cruz (@tedcruz) January 28, 2021
Legitimate questions that deserve answers . My guess is they were protecting their own hide if stocks burst and people couldn’t put up margin . It happens in commodity markets all the time . They don’t have to lend money if they don’t want to
— Steven Cohen (@StevenACohen2) January 28, 2021
Robinhood Returns to Near Normal Activity
One day after putting the brakes on buy orders, Robinhood is now allowing limited purchases, while still restricting fractional buy orders. Prices of AMC, Nokia and BlackBerry have fluctuated in price throughout the day, though none have returned to the level they were at at the time of Robinhood’s decision.
The Security and Exchange Commission (SEC) released a statement today noting the recent market volatility, saying:
“The Commission will closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.”
The SEC did not specifically mention Robinhood or any specific stocks.
Investors who feel they may have improperly suffered losses may file a complaint with the SEC: https://www.sec.gov/complaint/select.shtml
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