The aftermath of Redditors surprising Wall Street

Many have heard of the Reddit-Wall Street incident. Investors were pouring large amounts of money into short stocks of various tanking companies (if the tanking companies’ stocks went down, the investors would make money, if they went up, they would lose it). In January 2021, Reddit users primarily on the Reddit forum r/wallstreetbets, a forum with three million followers, decided to launch a buying spree of stocks from those tanking companies, observing this process. In doing so, they boosted the worth and received the money investors had bet on those stocks.

However, during the peak of this event, the Robinhood trading app blocked its users’ ability to continue buying stocks from those specific companies. The app displayed to its users that this was due to the stock market’s instability and fluctuations, but later it was revealed that Robinhood’s business partners, who performed trades on their behalf, were requiring more money as collateral. Many users and both Republican and Democrat politicians believed Robinhood broke their own rules they require their users to follow. So, what happened after that?

February 18, Robinhood attended a congressional hearing with the United States House Committee on Financial Services and over 50 representatives in attendance. Vlad Tenev, the CEO of Robinhood, was asked hundreds of questions about the company’s actions, particularly how the trading app may have treated its users unfairly. Republicans and Democrats alike sided against Robinhood’s hindrance of its users ability to trade on specific brands stocks. Anthony Gonzalez, a Republican representative of Ohio, and Alexandria Ocasio-Cortez, a Democratic representative of New York, both followed similar reasoning against the blockage. For more information on this hearing, the link is here

Robinhood has been criticized for its confetti like displays when trades are made, easy misconceptions on wins and losses (once resulting in a user’s suicide), and for its rather unhelpful help line—which was displayed for the hearings attendants first hand by Sean Casten, a Democratic representative from Illinois.

Since the hearing, the Robinhood trading firm has amassed almost 50 lawsuits. They are facing 46 putative class actions, which is “a lawsuit brought by one or more named plaintiffs on behalf of a potential group of similarly situated individuals (known as a class) who allegedly suffered a common claim,” as well as three individual actions because of the trade blocking.