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Robinhood Class Action Lawsuit Overview:
- Who: A Robinhood investor is suing Robinhood Financial, LLC.
- Why: The Robinhood lawsuit claims the company used a payment for order flow revenue system that denied customers the best possible trading prices.
- Where: The class action lawsuit was filed in Florida federal court.
A Robinhood investor filed a class action lawsuit against the investment company and its partner trading firms for failing to act in investors’ best interests by employing a payment for order flow revenue system that denied customers the best possible trading prices.
The lead plaintiff, Jim Antonio Alers, wants to represent a nationwide Class of current and former Robinhood customers.
Additional defendants of the Robinhood lawsuit are principal trading firms that paid Robinhood to route customer orders to them, including Citadel Securities, LLC, Apex Clearing Corporation, Two Signa Securities, LLC, Wolverine Securities, LLC, and Virtu Financial Inc.
The Robinhood lawsuit is seeking damages on behalf of Class Members, claiming that the financial companies put their bottom line before their duty to investors.
Robinhood Lawsuit Claims Co Lied About Revenue
Since its launch in 2015, Robinhood’s single largest source of revenue has been payment for order flow, where principal trading firms pay Robinhood to receive its customers’ investment orders, according to the class action lawsuit.
While this is not a violation of securities law on its own, Robinhood was allegedly aware that its high rates of payment for order flow interfered with its fiduciary duty to best execution, which requires firms to “execute customer orders on the most favorable terms.”
Robinhood also failed to conduct “adequate regular and rigorous reviews”of customer orders, claims the class action lawsuit.
While Robinhood boasts no trading commissions, the investment losses customers faced due to inferior execution prices exceeded the commission its competitors would have charged, according to court documents.
In 2018, Robinhood responded to criticism of its payment for order flow system by claiming on its website that its “order execution quality matched or beat that of its competitors,” despite internal analyses that showed Robinhood’s executives that the company actually performed much worse than competitors. The company removed the claim from its website in June 2019, says the Robinhood lawsuit.
Investors Lost to Bottom Line, Says Robinhood Lawsuit
The class action lawsuit claims that not only did Robinhood prioritize its bottom line over customers’ benefit, but that it knowingly hid its revenue stream from the public.
In 2014, before its public launch, Robinhood’s website disclosed that it expected to receive payment for order flow as part of its revenue. Later that year, Robinhood personnel allegedly became aware of the growing controversy surrounding payment for order flow.
The website’s mention of payment for order flow was subsequently no longer associated with how the company would make money and was described as “indirect” and “negligible.”
Customer service representatives were instructed not to mention payment for order flow when asked about the company’s sources of revenue, the Robinhood lawsuit claims.
The retail-investment brokerage faces a number of other legal actions lodged by investors. The company lost investors $10 billion by cutting off their access to volatile stocks such as GameStop earlier this year, according to a Robinhood lawsuit.
Robinhood has also been accused of sending spam texts to unwilling recipients in another lawsuit filed earlier this year.
Did you experience investment losses while trading on Robinhood’s platform? Tell us about it in the comments below!
The plaintiff is represented by Michael A. Citron and Kristen D. Montgomery of Mac Legal, P.A.; Igor Hernandez of Cornish Hernandez Gonzalez, PLLC; and Ely R. Levy and Venessa Valdes Solis of Levy & Partners, PLLC.
The Robinhood Fiduciary Duty Class Action Lawsuit is Alers v. Robinhood Financial, LLC, et al., Case No. 0:21-cv-61848, in the U.S. District Court for the Southern District of Florida.
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11 thoughts onRobinhood Lawsuit Says Investors Denied Best Trading Prices
Add me please. I’m just please them and I drop them.
Add me to the investigation. I did investment trading with Robin hood
Please add me to this lawsuit as I have an overwhelming amount of evidence to support the fact that they unlawfully use investors money in a manner that is not in their customers best interest, but rather their own. Further there changes to the op made last year resulted in, a number of very misleading practices that previously customers were familiar with, but Robinhood did not disclose the changes that were made although they were clearly deceptive i.e. spending balance used to be only cash not invested now it is including their brokerage account, which you have zero control over. Further I was informed of their maintenance fee for each stock which varies by the day, which is outrageous. Like I said, I have a plethora of information I would like to share please contact me.
I’ve lost $10,385 until today and no my account is restricted and I can’t even use the remaining $216 I have to my name
Please add to lawsuit
Yes, I was very much affected by this and my funds were frozen for hours and unable to sell.
I have lost over hundreds of dollars in robinhood I stopped using the app 1 month ago but have had an account since 2018
I too also have lost money in Robinhood. I thought maybe it was just the fact that the market either wins or loses its all a matter of luck and I didn’t have any but now I’m pissed.
I had the same problem, their market price is like a scam.
I followed the analysts recommended buys & out of 12 stocks 3 suffered a reverse split shortly after I bought them. Seems Obvious to me that stock values are manipulated, encouraging people to invest, value increases,, &those in the know sell at that higher price. Then reverse split & lames like me loose everything.
I closed my Robinhood account for this very reason! They did not act on my trades and left it hanging which cost me lots of money.