Angry internet users have filed over 30 class-action lawsuits against Robinhood for restricting stock buys on the app.
The lawsuits have been piling up in the PACER court database days after Robinhood stopped stock buys for GameStop and seven other companies. On Tuesday, PCMag counted 34 civil complaints against the company.
A Massachusetts-based man named Brendon Nelson was the first to file a class-action lawsuit against Robinhood, demanding it pay up in damages for depriving users of the chance to buy GameStop stock. Since then, dozens of users across the US have filed similar complaints.
Some of the lawsuits point out Robinhood users could only hold or sell the affected stocks as the share price for GameStop began to fall, benefiting short-sellers. “This is what the Hedge Funds wanted. When everyone is only selling, the price cannot go up because no one can buy the shares,” reads a complaint filed in Florida.
Another complaint filed in California names all the major stock trading platforms, claiming they engaged in a conspiracy and violated antitrust laws by preventing retail investors from buying the stocks. “In other words, Robinhood (and Apex Clearing Corporation) stole from the poor to give to the rich,” writes a separate class-action lawsuit filed in San Francisco.
However, the lawsuits may not have much of a chance in court. Robinhood’s customer agreement notes it has the power to stop stock buys, without any prior notice.
The company also claims it had no choice but to restrict the stock buys due to it running out of cash to cover the transactions. “The amount required by clearinghouses to cover the settlement period of some securities rose tremendously this week. How much? To put it in perspective, this week alone, our clearinghouse-mandated deposit requirements related to equities increased ten-fold,” the company wrote in a blog post over the weekend.
“We did this because the required amount we had to deposit with the clearinghouse was so large—with individual volatile securities accounting for hundreds of millions of dollars in deposit requirements—that we had to take steps to limit buying in those volatile securities,” it added.
The company is now allowing users to buy as much as 20 shares in GameStop. Nevertheless, Robinhood’s reputation may have been irrevocably damaged over restricting the stock buys.
The company’s CEO is expected to testify before Congress on Feb. 18. In the meantime, the share price for GameStop plummeted this morning from $227 to $93.