Robinhood App Hit With Lawsuit After Trying to Shut Down GameStop Uprising
Source: The Daily Beast
The financial trading app Robinhood is being sued by a user after it restricted trades to stocks popular on the Reddit forum r/WallStreetBets, according to a lawsuit filed in federal court Thursday.
The suit, filed in the Southern District of New York, alleges that the app “purposefully, willfully, and knowingly removing the stock ‘GME’ from its trading platform in the midst of an unprecedented stock rise, thereby deprived [sic] retail investors of the ability to invest in the open-market and manipulating the open-market.”
Users of r/WallStreetBets had helped pump up the stock prices of struggling companies, most famously GameStop, as a counter to short-selling investment strategies. Through the subreddit’s campaign, GameStop’s stock ($GME) went from under $4 a share in early 2020 to well over $400 earlier on Thursday.
However, on Thursday morning, Robinhood restricted further trading of $GME—along with other stocks popular in the forum, such as BlackBerry, Nokia, and AMC—only allowing users to close out of their positions.
Read more: https://www.thedailybeast.com/robinhood-hit-with-class-action-after-trying-to-shut-down-wallstreetbets-gamestop-uprising
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still_one
(98,883 posts)
C_U_L8R
(49,351 posts)wondering "why didn't i think of that?"
still_one
(98,883 posts)
BusyBeingBest
(9,173 posts)why they're restricting trading and shutting the small investors down. For whose benefit are they doing this?
PSPS
(15,313 posts)
PaulnFortWorth
(69 posts)social media manipulating people for profit. If I posted that a publically traded company was going bankrupt, I could sell short first, the price would tank, I'd then buy long and make a ton of profit after it stabilized.
If a group of people band together to manipulate stock prices using social media, they'll make a lot of money. And that's what might be happening.
Netflix did an excellent documentary called "The Social Dilemma"
If a group 1,000 shares at $4.00 per share and sold at $400.00, there would be almost a $400,000 profit.
jmbar2
(7,968 posts)It's a pyramid scheme. There will be bagholders.
Decoy of Fenris
(1,954 posts)Most of them put less than a thousand bucks worth into this whole scheme, and not a one of 'em gives a rip if they lose. It's a meme, and it's exposing the corrupt, class-based elitism of Wall Street vs. Main Street in a way the 1% understands; Over $10 Billion in Hedge Fund losses combined in the past... four days, at least one investment firm taking a 40% net worth loss in a day, with more to follow as shorts become a target across the board.
WSB has already won this particular battle. The question is, "Who's next?"
Decoy of Fenris
(1,954 posts)By and large the Reddit WSB crew aren't in this for the money, but to punish shorts that have a significantly higher float, exposing them to grievous risk of loss.
The Redditors don't care about making money, they're in it for the meme, and to watch a particularly nasty hedge-fund company (Melvin Capital) get crushed almost to the point of bankruptcy. -IF- they make money in the meantime, great, but an army of 3 million vengeful Internet trolls with a six hundred dollar stimulus check to burn screaming "Buy gamestop" does not a market manipulation make. Even Wall Street insiders and the former SEC chair are saying it's all above board, and only those getting crumpled by the Gamestop event are crying foul.
jmbar2
(7,968 posts)I was seeing a lot of posts on Stocktwits yesterday - folks talking about putting their life savings into it. If they all lose money, that's a lot of bagholders. Hate to see it, especially during hard times like now.
Decoy of Fenris
(1,954 posts)They just don't care. These are people whose 'life savings' are like, 10k. The largest I've seen is 53k, and that's the biggest 'winner' currently, a guy named DeepFuckingValue. He's up to 25 mil last I knew.
It's quite literally a game to the Redditors. The same people cheering the huge wins are also the ones clamoring for 'loss porn', and those posting those huge losses are heralded as heroes, martyrs of the cause, willing volunteers to strike out at those who have 'wronged' them. Many of these folks are people who have very little left to lose anyways, and their paltry losses are 'justified' so long as they do maximum damage in the meantime.
mezame
(295 posts)After watching The Social Dilemma (I encourage all of DU to do so if you can), I immediately deleted my Facebook account. I refuse to be part of putting money in that asshat's pocket. FB is evil. Period.
Interesting aside: if you also watch "Cuties" you'll learn how social media intentionally exploits our youth, and the impact it has on different cultures is horrifically destructive.
oldsoftie
(13,538 posts)He shorted the hell out of it, then filed a "citizens petition" with the FDA to stop approval of a cancer drug being developed. His petition had ZERO merit, but by law the FDA had to accept and consider it. Meanwhile, his followers knocked the stock down about 80% because of only HIS opinion. All perfectly legal. And it shouldnt be
DonCoquixote
(13,956 posts)Let us say there are a bunch of sticks that oh, favor the GOP. That would mean that people could band together and tank them. Gee, it is what they do to us. 
Miguelito Loveless
(5,727 posts)Will the prevent hedge fund managers from engaging in them as well?
Personally, I would outlaw shorting, options, and all derivative trading.
Buy the stock of companies you believe in, sell the stock when you no longer believe in them.
Everything else is just advanced fraud via paper-shuffling.
BusyBeingBest
(9,173 posts)they can rent or borrow shares and play games like this (to the destruction of businesses) instead of straight-up buying, holding, selling. Just more 2008 bullshit.
Miguelito Loveless
(5,727 posts)in a manner that is no way productive to the economy.
It allows the wealthy to game the system and get wealthier, while destroying infrastructure, jobs, and lives.
Grimelle
(219 posts)Those HedgeFunds selectively forgot about 2008.
jmowreader
(53,165 posts)There are more than one kind of derivatives. Commodities futures serve to stabilize that market...if you are manufacturing bread, it’s very helpful to know what you will pay for wheat in April, and buying a wheat futures contract does exactly that.
I would ban two kinds of derivatives: synthetic derivatives, where you buy the contract without owning the underlying item; and derivatives based on other derivatives. The synthetic CDO, which has synthetic credit default swaps as its underlying security, is especially bad.
Miguelito Loveless
(5,727 posts)Mosby
(19,491 posts)
MacKasey
(1,518 posts)Miguelito Loveless
(5,727 posts)Discourage churning and day trading. Ten cents a share would do the trick.
Also, tax all capital gains held for less than one year at 90%, falling 10% for each year all the way to 10% minimum. Force these people to buy and hold by punishing speculative behavior.
marie999
(3,334 posts)For some of the stocks we buy, we don't know anything about the company. Why should we be taxed 90%? Many people have their IRAs and 401Ks in stocks. Higher taxes will mean they have to work longer before they can retire.
Miguelito Loveless
(5,727 posts)is buy good stocks, and hold them. If you don't want to pick individual stocks, then buy Spiders (S&P index). Historically index funds have a far better return on investment over the long haul. An exemption would be available on stocks traded by an index fund when they have to buy/sell due to a stock being added to, or removed from, the fund.
Trading stocks in and out is a recipe to enrich Wall Street while impoverishing the investor.
marie999
(3,334 posts)Working people are better off investing, but my husband has been 100% service-connected disabled for over 30 years and I have been 100% service-connected disabled for almost 25 years, it gives us something to do.
Miguelito Loveless
(5,727 posts)over the last 50 years or so (last I looked and factoring in inflation). Maybe 14% in the last ten years, but not long term for retirement. This is WAY ahead of pretty much every long term investment fund on the planet, has no fees, and no need for constant "tinkering" (buying and selling). Also way safer than trying to time the market and constantly trading.
Starting with $5,000 at age 30, and investing $125 a week until age 65 would net you over $1 million.
oldsoftie
(13,538 posts)MacKasey
(1,518 posts)I think Elizabeth Warren had a plan like that
oldsoftie
(13,538 posts)But it might put the brakes on HFTs who make money by trading in fractions of cents by the millions of shares. I think HFTs should be outlawed anyway. Anything that isnt available to all of us shouldnt be allowed.
Miguelito Loveless
(5,727 posts)that churns the market, creating volatility, just so the big traders can make money on trades involving pennies in profit per share.
HariSeldon
(541 posts)In my opinion, there should be two trading windows each market day: morning and afternoon. During each window, a trader can register a price curve for buying and/or selling a stock or commodity. When the window closes, the exchange's computers figure out the most economically efficient trades and record them. There is truly no reason that quick action on the order of seconds or even milliseconds should have benefits to those who can afford it.
oldsoftie
(13,538 posts)And thank God it will NEVER happen.
Miguelito Loveless
(5,727 posts)99% of which is done by computers owned by banks and hedge funds gaming the system. It would hardly put an end to ALL trading.
oldsoftie
(13,538 posts)oldsoftie
(13,538 posts)THEY are the ones who have the ability to do things the average person cant. And thats not a fair market.
Miguelito Loveless
(5,727 posts)Though a non-tax solution is to simply ban short-selling and options, which create needless volatility and encourage unproductive risk-taking.
oldsoftie
(13,538 posts)Its far too easy to drive down a small company with light trading volume.
Polybius
(21,875 posts)If you make a profit and sell.
bucolic_frolic
(55,033 posts)Other broker/dealers are inaccessible for many people according to Twitter flow. TDAMeritrade, AllyInvest. This is not restrictions on trading GME, the entire website is down. Don't know the cause, some posts say they trade some order flow off hedge funds.
lunasun
(21,646 posts)
GulfCoast66
(11,949 posts)oldsoftie
(13,538 posts)so lets see if these poor, poor hedge funds get the rules changed to help them out.
Mr. Sparkle
(3,705 posts)Very unfair on the small investor
bbernardini
(10,016 posts)
Politicub
(12,327 posts)And now the hedge funds want to change the rules to favor themselves. And the favored trading applications of the Reddit folks are conspiring to stop small investors.
Many people can and will lose money for trading stocks. Just like some people have a gambling compulsion, we don’t shut down casinos.
How the redditors are being treated, and potentially, probed by the SEC, is another example of how capitalism is tilted in favor of the rich.
rdking647
(5,113 posts)not only should they go after robinhood but the hedge funds behind it should be shut down.
this is just another example.
a simple easy way to stop them
impose a tax on every stock order after x per day. this will stop the high frequency traders while allowig teh market to funtion normally
Dr. Strange
(26,058 posts)Good Lord, it's the fucking apocalypse.
maxrandb
(17,415 posts)It seems that it's just an incentive to destroy companies.
I'm trying to understand the benefits of allowing it. I heard it described as "beneficial" in the same way that maggots eating carrion is "beneficial", but at least in that scenario you get flies.
BusyBeingBest
(9,173 posts)trying to influence or manipulate the downward spiral of the companies they target. Not with billions invested in such schemes.
CaptainTruth
(8,191 posts)You can either bet that it will go up, or bet that it will go down.
The ability to short (or invest in mutual funds that short) has certainly been beneficial to my IRA.
DonCoquixote
(13,956 posts)a casino bet is heavily regulated and inspected, because the casino owners know that they can spend the rest of their lives in jail if they get caught, just ask the Mafia people who built Vegas in the first place. Wall Street is much more crooked than even the Mafia.
oldsoftie
(13,538 posts)I say bull shit.
Its far too easy to ruin smaller companies by massive shorting.
bucolic_frolic
(55,033 posts)for brokerages shutting down for today or two days. Or even until the weekend.
Liquidity issues. I mean WHY shut down the whole brokerage over trading in a handful of stocks? Too many orders? It's all electronic.
So I think it runs deeper. Clearing or capital issues.
Renew Deal
(85,096 posts)Decoy of Fenris
(1,954 posts)AMC, American Airlines, Gamestop, Bed Bath and Beyond. They're only accepting 'sell' orders from retail investors while allowing the giant firms to 'restructure' while the investors are blocked out.
It's Wall Street covering Wall Street's ass, and pure and utter market manipulation, but the same people who can hold the brokerages accountable are the ones who are losing the most to the WSB crowd.
bucolic_frolic
(55,033 posts)Reports of Ameritrade being inaccessible on Twitter. It was way more than just trades in GME and AMC.
Decoy of Fenris
(1,954 posts)Hestia
(3,818 posts)was because the Sports Betting Bros were using the market until sports betting came back. The article sure made it seem highly likely that that was what was going on.
Heard too this am that the hedge funds were whining because they were left holding the bag for losses. One hedge fund lost $14B. Boo Hoo.
EarthFirst
(4,140 posts)It allowed Silver Lake to transfer $600 million of the AMC debt it held into 44 million shares to offset their short positions and tank the long calls.
Pure.Market.Manipulation.
In broad daylight.
CaptainTruth
(8,191 posts)"You shouldn't all be buying that stock! It's not like we created a market for it or anything!"
BusyBeingBest
(9,173 posts)we'll help save this company and maybe make some money while we're at it...Is that a conspiracy to manipulate? Considering that the hedge fund short-seller guys were openly and publicly betting (and engineering) that GameStop would tank, and THAT is legal, then I can't see anything the Reddit crowd is doing is any less legal.
Decoy of Fenris
(1,954 posts)And given the primary benefactors of the lawsuits are an army of 3 million angry redditors, there's no way this will end cheaply for any brokerage involved. We could well see some bankruptcies for this.
oldsoftie
(13,538 posts)Especially when its by a group of small investors who banded together.
I think all large scale short selling should be illegal. If you thunk the stock is going down, then buy put options. Too easy to manipulate stock prices of a lightly traded stock.
BUT..... at some point gamestop will drop. A LOT.
paulkienitz
(1,507 posts)Decoy of Fenris
(1,954 posts)The goal is to make the 'squeeze' hold as long as possible to maximize damage to the hedges. With 3 bil in damage to only one such hedge fund in the past 48 hours, I'd say they're doing quite well. As it stands, retails are continuing to hold despite the today's lockdown.
As an investor on CNBC mentioned in an interview, "They don't care about the money. It's just a game to them. They're in it for the squeeze on Wall Street".
paulkienitz
(1,507 posts)You think redditors aren't taking profit after making a huge bubble in the price of a garbage company? It's still a form of pump and dump -- just one where you're supposed to delay the dump part for a while.
I know we all love to see privileged parasitic greedheads get fucked by a bunch of shitposters, but that doesn't make stock manipulation any more of a plus for society than it was before.
Many people now seem willing to despise shorters as parasites... we need to extend that attitude to all forms of speculative stock trading, because they're no better. Tax every trade, and let stocks be used for their true purpose: investing long term in a company's actual production.
Demsrule86
(71,542 posts)
RainCaster
(13,684 posts)Here's the deal as I understand it
It's NOT a pump & dump
It's NOT anything illegal
It's revenge by the little guys
What it is
A group of small-time activist investors on the internet (Reddit/WallStreetBets)
They have banded together to research & extract some justice against a small group of hedge funds that have specialized in destroying companies for profit. In doing research, they uncovered a pair of hedgies (r/ slang for hedge fund managers/firms, used interchangeably) that got extremely greedy and bought puts against GME (trading symbol for GameStop) that totaled 140% of the total available stock. What that means is that as long as people keep trying to unload GME, they (Citron & Melvin) can gobble it up and make a nice profit at it.
The Reddit approach
Shorts/puts only work if the stock goes down. The truly risky thing about shorts is that the downside (loss potential) is unlimited. If you buy puts at $25 (for example) and the stock price is above that on the day the puts are due, you have to pay the difference. NO MATTER HOW LARGE THAT DIFFERENCE IS. So the Redditors are trying to buy all the outstanding shares of GME. Period. That's it.
What does that do?
Because there are now fewer shares available (supply & demand), the price is going up. It has gone high enough that these funds have had to have emergency cash injections this week totaling more $3B. Current total losses on paper exceed $50B right now. Comments on Reddit say that for every $10 the stock rises, Citron/Melvin lose $1B.
So the stock price just keeps going up. There is no upper price limit, because these folks are willing to exceed the norms of Wall Street and overpay shares to lock them up. That way, Citron/Melvin cannot buy them to honor their shorts. That's called a "short squeeze" and from time to time, funds have done that to one another. it's ugly and usually costs lots of money to the loser. This is not a zero-sum game because the winner still has a large handful of stock worth more than was paid for it. Slowly selling after the puts due dates is the prudent way to gather all the winnings.
The fix
The brokerages (it appears) have colluded with one another today and removed the ability for any retail brokerage to buy this stock- sells only. It's not just Robinhood, ALL the brokerages that I have accounts with have been limited as well by their upstream trading partners. Merrill, T. Rowe, Fidelity, Morgan Stanley, eTrade and Chase. There may be other brokerages affected by this, these are just the ones I deal with. Several other stocks were included in the list as well- Nokia, Bed Bath & Beyond, maybe others. At least one suit has been filed already, and will go class action very quickly.
That fix isn't working however, because activist investors in other countries are picking up on this and buying GME through their non-colluding markets. Look at the price/traffic curve today, and you can see when the foreign investors kicked in. They took over the hedgie's manipulations that had been driving the price down, and even though the purchase amounts were less, they drove the price right back up again. Citron/Melvin have very few actual shares to trade back/forth and that is why their high speed trades are not driving the market as much as they need to survive.
intrepidity
(8,581 posts)It's exciting to watch, if only from the sidelines. 