Robinhood, the app that looks like the lovechild of a stock-trading platform and a video game, was hit with a record $70m bill by a US watchdog for causing investors to lose millions in total from misleading financial information and system outages.
The Financial Industry Regulatory Authority (FINRA) ordered the software biz to cough up $57m in fines plus pay back $12.6m to customers to cover their losses with interest.
“The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood’s violations, including FINRA’s finding that Robinhood communicated false and misleading information to millions of its customers,” Jessica Hopper, the head of FINRA’s Department of Enforcement, said in a statement.
Founded in 2013, the brokerage firm skyrocketed in popularity during the COVID-19 pandemic. As the coronavirus upended lives across the world, people flocked to the app hoping to make money off cryptocurrencies, sky-rocketing shares, so-called meme stocks, options, and more. However, FINRA said Robinhood, which tries to provide a relatively easy-to-use interface to shares and currency trading, wasn’t nearly as helpful and clear as it could have been for something as important as personal investments.
And, we’re told, this has been going on for years:
And years:
And years:
Robinhood previously said “unprecedented load” caused the March 2020 fiasco. Not being able to trade properly during the downtime cost individual investors tens of thousands in losses, and Robinhood will pay at least $5m in restitution to those folks, the regulator said.
Also in January 2021, the firm simply just blocked people from buying specific stocks that were particularly volatile, such as Gamestop and AMC. And between 2018 and 2020, tens of thousands of users submitted written complaints that Robinhood failed to pass on to FINRA as required by law, the authority said.
On top of that, thousands of customers suffered more than $7m in total losses as a result of Robinhood’s poor handling of cash balances and other financial information, the watchdog said, and those folks will be paid back.
The most serious case cited by the watchdog was the death of twenty-year-old Alex Kearns in June 2020. He took his own life after he thought he had racked up a $750,000 debt from a risky options trade in the app when, in fact, the software had simply displayed “an inaccurate negative cash balance.” Kearns’ parents sued the company earlier this year for negligence and wrongful death.
Robinhood will cough up the dosh to settle the whole affair, and will not admit nor deny any wrongdoing, according to FINRA. The biz was not immediately available for comment. ®
source: The Register
