Robinhood, the retail platform at the center of the GameStop meme saga, has been fined $ 70 million by the financial industry regulator, albeit for reasons unrelated to GameStop . FINRA has ordered Robinhood owners to pay a $ 57 million fine and $ 12.6 million plus interest on restitution to its customers for what it calls "systemic oversight failures and significant damages."
The Robinhood trading app benefited from the rise in retail popularity during the Covid-19 pandemic and the associated rise in meme stock trading organized by communities of speculators such as the WallStreetBets subreddit. Between March last year and now it has gone from 13 million users to 31 million.
FINRA press release described the penalty as the largest ever leveraged and explained the size of the fine and reached restitution after considering "the significant and widespread damage suffered by customers, including millions of customers who received false or misleading information from the firm, millions of customers affected by the company’s system outages in March 2020 and thousands of customers the company approved to change options, even when it was not appropriate that customers do it ".
Among those who received “false or misleading information” from Robinhood was Alex Kearns, who took up daily trading as a hobby during closing. Kearns committed suicide after incorrectly reading a negative balance of $ 730,165 in his account. In fact, he had a positive balance of $ 16,000.
Robinhood later published a blog post on "fulfilling our responsibilities to customers" which he explained was expanding its focus and communication with customers, as well as "correcting purchasing power indicators, cash balances (including cash balances). negative cash flow), historical performance figures and customer communications on the risk of loss in margin debit transactions ".
The FINRA statement also details the use of Robinhood robots to approve new accounts, which resulted in customers "who either did not meet the company's eligibility criteria or the accounts of the companies. which contained red flags "and" a series of critical system failures and failures "that cost dozens of users. of thousands of dollars.