Multiple lawsuits have been filed Thursday against Robinhood Financial after the company restricted its users from trading GameStop and other shorted stocks it deemed volatile.
Brendon Nelson, a retail investor from Massachusetts, filed a suit in the Southern District of New York claiming that the company violated “the implied covenant of good faith and fair dealing” with its customers when it forbid users from making certain transactions.
“On or about January 27, 2021 Robinhood, in order to slow the growth of GME and deprived their customers of the ability to use their service, abruptly, purposefully, willfully, and knowingly pulled GME from their app,” the lawsuit says. “Meaning, retail investors could no longer buy or even search for GME on Robinhood’s app.”
— Lydia Moynihan (@LJMoynihan) January 28, 2021
Richard Gatz, a Robinhood user and attorney from Naperville, Illinois, also filed a lawsuit alleging that the company “continued to allow trading for institutional investors” after forbidding individual investors from purchasing not just GameStop stock, but also several other shorted stocks that were popular among Redditors, such as Blackberry, Nokia, and AMC Entertainment.
Gatz’s lawsuit claims Robinhood “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.”
The lawsuit explained that Gatz “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.”
Miami lawyer Jeff Erez, who specializes in securities-fraud litigation and has represented clients against Robinhood before, is not optimistic the lawsuits will be successful, telling Bloomberg: “I’m looking at the Robinhood contract, and it says in black-and-white they can block or restrict trades at any time. I’m not aware of any law that would guarantee you a right to purchase a certain security at a certain brokerage firm.”
As The Daily Wire reported:
Robinhood, the free stock trading app that Reddit traders used to buy shares of GameStop, resulting in an intense stock surge, has banned trading the retailer’s shares, as well as shares of several other companies targeted by r/WallStreetBets, halting GameStop’s meteoric rise.
Discord, an independent VoIP and instant messaging service largely used by gamers, also banned members of r/WallStreetBets for “hate speech” after the group migrated to Discord servers following a brief Reddit outage.