LOS ANGELES (Legal Newsline) - Robinhood, an online stock broker, has been hit with a wave of lawsuits over its recent handling of stock trades in Gamestop, AMC Theaters and Blackberry, and an attorney handling one of them says the company was "playing God."
Shares in those companies skyrocketed after a social media push to buy the stocks amid media attention over a practice known as “short selling.” But at times, Robinhood limited its customers' abilities to buy shares in those companies.
“Simply put, Robinhood limited buying in volatile securities to ensure it complied with deposit regulations,” the company said on its website.
In keeping customers from buying the shares, Robinhood broke the law by committing “selective market manipulation,” Joseph M. Kar, a California attorney who has filed a federal lawsuit again the company, told Legal Newsline.
Although the English folklore hero Robin Hood was known for stealing from the rich to give to the poor, "Robinhood and its app have ironically instead stolen from its poor customers to give to the rich,” the lawsuit states.
On Jan. 28, Kar’s client, Levi Kobos, tried to buy shares of AMC and Blackberry through Robinhood but was denied access, the lawsuit alleges.
“The courts have ruled you can’t interfere with the interplay between the natural supply and demand,” Kar said. “By creating a scenario where you shaded out the buy button, at intermittent times and unpredictably, you are basically playing God. And they have millions of people they are playing God over.”
Kar’s lawsuit seeks class action status to represent other Robinhood customers.
Class action lawsuits allow small investors to challenge the actions of large brokerage companies, said Kar.
“The small guy would never go after Robinhood, they would get crushed,” the attorney said. “The losses here are not so substantial so that people injured could move forward on their own. The idea behind Robinhood was to attract the micro investor who is trading one or two shares.”
At some point, the company will have to provide relief to investors who were financially damaged, Kar said.
“They have to go with lawyers who know what they’re doing,” he said. “They have to go with lawyers who understand what the defect is here. We’re saying that what Robinhood did was illegal, outright. They violated securities laws they are supposed to be regulated under.”