Robinhood, a stock trading app, is facing a lawsuit for blocking GameStop (GME). Under the new restrictions, users will be allowed to sell existing GME stocks, but won’t be able to buy new ones.
“Robinhood purposefully, willfully, and knowingly removing the stock “GME” from its trading platform in the midst of an unprecedented stock rise thereby deprived retail investors of the ability to invest in the open-market and manipulating the open-market,” the lawsuit stated.
The restriction applies to companies including GameStop, AMC and BlackBerry. Stocks for GameStop, AMC and Blackberry have been soaring in volatile fashion. GameStop stock went up more than 250% in January. Reddit users, wallstreetbets, created something known as “short squeeze” on GameStocks app. This means that some investors, known as shorts, bet that a company’s stock will fail. These investors borrowed stocks from other investors and sell it with plans to buy it back when prices fall and return it to original owners. However the plan backfired.
“Amid this week’s extraordinary circumstances in the market, we made a tough decision today to temporarily limit buying for certain securities. As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits. These requirements exist to protect investors and the markets and we take our responsibility to comply with them seriously, including the new measure we have taken today, “ Robinhood posted on their blog.
Wiki Production Code: A0543