Business

Why Robinhood was fined $70 million


TL;DR

  • Many users were mad at Robinhood for suspending the trade of GameStop share during the rise of the stock
  • Robinhood was fined a total of $70 million for technical issues harming its users, $57 million of the fine were in penalties while the other $13 million went to the harmed users
  • Part of this lawsuit is motivated by the suicide of a 20-year-old man who took his own life after suffering heavy losses on Robinhood. Robinhood has not yet spoken of this man or issued an apology of any sort.
  • Robinhood’s head of public policy communications hopes to put all of this behind and focus on the future by increasing and focusing on the customer support team

Robinhood is a famous stock trading service company that is known for allowing commission-free trades. The company was founded in April of 2013 by Stanford graduates Vladimir Tenev and Baiju Bhatt. The mission of Bhatt and Tenev was to be able to expand stock investing from just the rich class to everyone by allowing for commission-free trading. Despite the fact that their mission is to allow everyone to have access to trading, they have found themselves to be in trouble for not following that.

The founders of Robinhood, Vladimir Tenev and Baiju Bhatt (CNBC)

Robinhood was recently under fire for suspending the trade of GameStop shares after GameStop rose up in price after many in the WallStreetBets server invested into the stock; this drove up the price. As a result, Robinhood faced many lawsuits and was in legal trouble.

More recently, however, Robinhood finds itself in trouble once again, as they were fined roughly $70 million due to having technical issues that led to the financial harming of millions of its users. These issues date all the way back to the beginning of 2020 with outages that didn’t let anyone trade on the app. Out of the $70 million fine, $57 million is for the penalty and the other $13 million is going towards the users that were affected by the issues. What’s even more shocking is that this is the largest penalty that the FINRA (Financial Industry Regulatory Authority) has ever imposed. 

Robert W. Cook, President and CEO of FINRA (Investment News)

A huge reason as to why there is action being taken against Robinhood is because of a recent suicide of a 20 year old man who unfortunately took his own life after suffering from heavy losses on Robinhood. Robinhood didn’t say anything about this situation yet. However, Jacqueline Ortiz Ramsay, Robinhood’s head of public policy communications, stated that “We are glad to put this matter behind us and look forward to continuing to focus on our customers and democratizing finance for all” (CNBC). Robinhood has been working to prevent issues like this in the future by investing a lot of time and money on the customer support aspect of the company. 

Sources

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