Class-action suit filed against Robinhood app for blocking trading of GameStop, other stocks
A class-action lawsuit was filed Thursday against the stock-trading app Robinhood for preventing its users from freely buying stock in GameStop amid the ongoing situation with the declining video game retailer and its dramatically changing stock price.
The complaint—filed in the U.S. District Court of the Southern District of New York—claims that, because “Robinhood purposefully, willfully, and knowingly removing the stock ‘GME’ [GameStop] from its trading platform in the midst of an unprecedented stock rise,” the online brokerage firm “thereby deprived retail investors of the ability to invest in the open-market and manipulating the open-market.”
As part of the lawsuit, the plaintiffs are requesting an immediate injunction mandating Robinhood to reinstate GME on its trading platform.
At the time of publication, Robinhood has not issued a statement about the lawsuit.
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Earlier on Thursday, Robinhood prevented users from purchasing new stock in GameStop, AMC, and Blackberry but has allowed users to close out existing securities.
“In light of current market volatility, we are restricting transactions for certain securities to position closing only, including $AMC and $GME,” the company tweeted Thursday, with a link to a statement. While the tweet at the time of publication has a little of 6,000 likes, that number is astronomically dwarfed by the 58,000 comments and the roughly 25,000 retweets.
Earlier this week, other trading platforms like TD Ameritrade and Charles Schwab restricted the trading of shares such as GameStop and AMC, which has also been struggling to stay afloat amid shifts in the film industry toward streaming services.
To briefly explain the situation, GameStop’s stock price has shot up dramatically over the course of more than a week due to users on the Reddit community r/WallStreetBets encouraging other individual investors on the subreddit to purchase stock in the fledgling video game vendor through equities and calls.
Notably, politicians on both extremes of the ideological spectrum have come out in support of Congress looking into Robinhood restricting trading for its users, saying that it’s hypocritical that hedge funds can still trade as they wish, such as Rep. Alexandria Ocasio-Cortez (D-N.Y.) and Sen. Ted Cruz (R-TX).
You can follow Douglas Braff on Twitter @Douglas_P_Braff.