Class action complaint filed against Robinhood
FOX Business’ Kristina Partsinevelos on the class action complaint filed against Robinhood after it restricted trading and the latest on GameStop.
New York Attorney General Letitia James announced she is looking into recent activity on Robinhood after the trading platform restricted trading of certain securities Thursday, resulting in multiple lawsuits against the company.
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“We are aware of concerns raised regarding activity on the Robinhood app, including trading related to the GameStop stock," James said in a statement. "We are reviewing this matter.”
Robinhood and other trading platforms announced Thursday that they were restricting trading for a handful of securities that have exploded in value this week, including GameStop, AMC, BlackBerry, Tootsie Roll, Trivago, and others.
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ROBINHOOD HIT WITH TWO LAWSUITS AFTER RESTRICTING GAMESTOP, AMC TRADES
Shares of GameStop fell 44% Thursday after gaining nearly 800% earlier in the week. AMC similarly dropped 56% after skyrocketing in recent days.
Day traders were incensed that they were cut off from buying these securities and only given the option to close out their positions.
A lawsuit was filed by one Robinhood user in the Southern District of New York accused Robinhood of "purposefully, willfully, and knowingly" removing GameStop from its platform, thereby depriving retail investors "of the ability to invest in the open-market."
Another lawsuit filed in the Northern District Court of Illinois accused Robinhood of manipulating the market.
Robinhood cited recent market volatility in its explanation for restricting the trading of certain securities.
"We continuously monitor the markets and make changes where necessary. In light of recent volatility, we are restricting transactions for certain securities to position closing only," the company said in a statement. "We also raised margin requirements for certain securities."
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Vladimir Tenev, the co-founder of Robinhood, tweeted Thursday that the restrictions are due to certain capital requirements laid out by the SEC.
"As a brokerage firm, Robinhood has many financial requirements, including SEC net capital obligations and clearinghouse deposits," Tenev wrote. "Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment."
Tenev also said the platform will start allowing "limited buys of these securities" Friday.
Many retail investors and lawmakers on both sides of the aisle accused the company of siding with hedge fund short-sellers, who have already lost billions amid the surge in GameStop and other stocks.
"We now need to know more about [Robinhood's] decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit," Congresswoman Alexandria Ocasio-Cortez, D-N.Y., tweeted Thursday.
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Sen. Ted Cruz, R-Texas, told reporters Thursday that he wants to see "some transparency" from Robinhood, saying that their actions seem to favor a handful of "rich influential players at the expense of ordinary citizens and ordinary traders."
Another Republican senator, Pat Toomey from Pennsylvania, said he finds it "very disturbing that a platform would suddenly freeze out retail investors who are simply exercising their right to make a purchase."
FOX Business' Charlie Gasparino also reported Thursday that the SEC is looking into a potential market manipulation case involving the surge of GameStop stock and the Reddit forum WallStreetBets, where retail investors discussed the massive short squeeze.
The Associated Press and FOX Business' Audrey Conklin contributed to this report.
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