Robinhood trading app hit with $70M penalty for ‘misleading’ customers Different bank notes from difference countries pinned to a wall

Robinhood, the retail trading platform at the centre of the GameStop meme stock saga, has been hit with a $70 million penalty by the Financial Industry Regulatory Authority, though for reasons unrelated to GameStop. FINRA has ordered Robinhood's owners to pay a fine of $57 million and $12.6 million plus interest in restitution to its customers for what it calls "systemic supervisory failures and significant harm".

The Robinhood trading app profited from the increased popularity of retail day trading during the Covid-19 pandemic and the associated rise of "meme stock" trading organized by communities of speculators like the WallStreetBets subreddit. Between March of last year and now it's gone from 13 million users to 31 million.

FINRA's press release described the penalty as the largest it's ever leveraged, and explained the size of the fine and restitution was arrived at after considering "the widespread and significant harm suffered by customers, including millions of customers who received false or misleading information from the firm, millions of customers affected by the firm's systems outages in March 2020, and thousands of customers the firm approved to trade options even when it was not appropriate for the customers to do so."

Among those who received "false or misleading information" from Robinhood was Alex Kearns, who picked up day trading as a hobby during lockdown. Kearns killed himself after incorrectly reading a negative balance of $730,165 in his account. He actually had a positive balance of $16,000.

Robinhood subsequently published a blog post about "meeting our responsibilities to customers" that explained it was expanding its customer support and communication, as well as "correcting buying power displays, cash balances (including negative cash balances), historical performance figures, and customer communications regarding the risk of loss in debit spread transactions."

FINRA's statement also details Robinhood's use of bots to approve new accounts, which resulted in customers "who either did not satisfy the firm's eligibility criteria or whose accounts contained red flags" and "a series of outages and critical systems failures" that cost its users tens of thousands of dollars.

free v bucks generator

Leave a Reply

Your email address will not be published. Required fields are marked *