The financial trading app Robinhood is again in legal trouble as a class action lawsuit has been filed over the company’s decision to impose trading restrictions and blocking users from cashing in on stocks of GameStop and others. The lawsuit alleges that Robinhood deprived their customers of the ability to use their service in an effort to manipulate the market for the benefit of people and financial institutions.
The lawsuit filed before Manhattan federal court stated, “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. Retail investors could no longer buy or even search for GME on Robinhood’s app.”
The lawsuit is filed by Massachusetts resident Brendon Nelson on the behalf of all the users of the trading app in the US and urges the federal judge to issue directions to the app to immediately reinstate the stock to the trading platform.
The shares of the video game company took a huge spike on Wednesday after users on the web forum Reddit targeted hedge funds making big bets against GameStop.
The lawsuit came after the company announced it would restrict a handful of stocks including GameStop citing the ‘recent volatility’. Besides Gamestop, these restrictions are also going to affect trading in stocks of AMC Entertainment, Bed Bath & Beyond, Blackberry, Nokia, Express Inc., Koss Corp., American Airlines, Tootsie Roll, Trivago, and Naked Brand Group.
Interactive Brokers, Charles Schwab, Webull, and TD Ameritrade also announced similar restrictions.
Robinhood on Thursday stated that investors would only be able to sell their positions and not open new ones in some cases. The company also stated that Robinhood will also require investors to put up more of their own money for certain trades instead of using borrowed funds