Robinhood Faces Lawsuits After Halting GameStop and AMC Trades
Robinhood faces multiple class action lawsuits after restricting purchases of GameStop and other volatile stocks, drawing fierce accusations of favoring Wall Street over retail investors.
Robinhood faces intense backlash and at least two class action lawsuits after the trading app halts customer purchases of GameStop and other heavily traded stocks. The company partially reverses this decision by Thursday afternoon, but the legal actions accuse Robinhood of harming retail investors by blocking their ability to buy or short these surging shares.
Social media critics accuse the platform of siding with Wall Street bigwigs by protecting short sellers who suffer massive losses as everyday investors drive up the stock prices. The growing controversy prompts members of Congress to demand an investigation into Robinhood's motives during this unprecedented market frenzy.
Legal experts note that plaintiffs face an uphill battle in court because brokers do not have a strict obligation to carry out trades in every specific security. Robinhood likely relies on its terms of service, which give the company broad discretion to restrict trading during extreme volatility to protect its own balance sheet, regardless of conspiracy theories.