The Crash of Robinhood.com’s Website Causes Losses for Investors
On March 3, 2020, Meyer Wilson attorneys, along with their co-counsel, filed the first lawsuit in the Northern District of California against Robinhood.com, a “commission-free” online trading platform.
On March 2 and 3, the Robinhood.com platform was offline for an entire day and most of the second day, preventing investors from making trades of any kind during the outages. Worse yet, these were not ordinary trading days, but some of the most volatile in market history. As a result, investors were not able to position themselves to respond to rapidly changing market conditions, resulting in substantial losses for investors. The class action lawsuit asserts, among other claims, that Robinhood failed to disclose that its trading platform was inadequately built and maintained to handle consumer demand and that Robinhood failed to provide services when the outage occurred due to a lack of infrastructure and alternate means for customers to place timely trades.
Robinhood.com chalked up the problem to “stress” on its infrastructure. But Robinhood.com was fined $1.25 million in December 2019 by the Financial Industry Regulatory Authority (“FINRA”) for failing to execute customer orders on its platform. In other words, Robinhood already knew, prior to March of this year, that it had a problem with its systems, but failed to fix it. Robinhood has also admitted that it must invest more funds in its infrastructure; it was reported in the press on May 5 that it would use ”some” of the money just raised in a $280 million funding round to invest in its platform. Of course, that’s too little, too late for the investors already harmed by the March outages.
The lawyers at Meyer Wilson, along with their co-counsel, seek to hold Robinhood accountable to the customers who were harmed. If you are a Robinhood customer and suffered losses because of Robinhood’s failure to maintain working systems for making trades, please contact us for a free consultation.