US-based multi asset trading app Robinhood, which also provides cryptocurrency trading for major digital assets, has come under fire in the past 24 hours for halting trading for the GameStop stock, and also several other stocks that have been promoted in recent days. Several investors have filed lawsuits against the brokerage company as their decision to stop trading has resulted in investor losses.
The stock has nothing to do with the actions of business decisions of the GameStop company, but has become almost legendary in the past two days as redditors from the now-renowned WallStreetBets subreddit and other participating retail investors pulled one over hedge funds that were short-selling the stock. The drama surrounding GameStop has become so widespread that even those who are usually financially illiterate have taken interest in the workings of how short-selling and hedge fund strategies work.
Robinhood claimed that the suspension was a response to severe market volatility of the stocks mentioned, but those within and outside of its community are not convinced, given the timing of the suspension. According to Bloomberg, lawyers who reviewed Robinhood’s contracts said that these investors are unlikely to succeed in their complaints, as the company clearly states that it can “block or restrict trades” at their own discretion.
However, this has garnered the attention of several lawmakers and leaders in the tech industry, including Congresswoman Alexandra Ocasio-Cortez, Elon Musk, Senator Ted Cruz and Elon Musk, just to name a few. The Robinhood app has also taken a hit on the Google Play store, where thousands of one-star ratings nearly knocked the app off the store, but Google has reportedly removed several negative reviews to keep the app afloat.
Robinhood’s saga is prompting the public to think about how private companies handle their funds, and how its overall business model and the wider economic infrastructure are designed to protect the rich, which has been the key point of contention with the GameStop stock situation.
One thing is for certain: Once an investor-favourite for offering both traditional and digital assets for easy trading on its platform, Robinhood’s reputation has been damaged significantly.