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UPDATE: On Oct. 5, 2020, allegations that the Robinhood app outage cost investors are overbroad and “free of detail,” according to the online trading company in a motion to dismiss the case.
A system failure on Robinhood, an online stock trading platform, was caused by the company’s negligence, according to a class action lawsuit filed in California federal court.
Lead plaintiff Colin Prendergast claims that he and other Robinhood customers were barred from advantageous investments due to a system outage that crashed the platform on March 2, 2020, lasting for more than one day.
According to the Robinhood class action, Prendergast noticed that $3,000 in his investments on Robinhood were losing money; however, he when he went to sell them, he was unable to, resulting in more money lost.
“Robinhood is an online brokerage firm. Its customers place securities trades through the firm’s website, by using a web-based application or ‘app,’ or by calling the firm’s help center,” explains the Robinhood class action lawsuit. “Robinhood permits customers, when its trading platform is operational, to purchase and sell certain securities, including option contracts.”
In a nutshell, Robinhood customers install the web-based application on their smart device and are able to very easily buy and sell stocks and other investments, often with a few swipes of the screen.
According to the Robinhood class action lawsuit, the March outage on the trading platform not only restricted customers from buying and selling securities, like stocks, it also made it impossible for customers to contact Robinhood customer service.
“This loss of access to Robinhood’s trading platform and absence of customer service support caused concrete, particularized, and actual damages for Robinhood customers, like Plaintiff, who held options contracts expiring during the Outage,” states the Robinhood class action lawsuit.
“As a result of the Outage, Plaintiff and members of the class proposed below were unable to exercise their option contracts or trade them to capitalize on gains or to mitigate losses. Most of those contracts thus expired unexercised and worthless.”
According to the Robinhood class action lawsuit, the online trading platform has suffered from a history of outages, although none more serious than the March 2 outage.
The plaintiff says Robinhood neglected its obligation to maintain an adequate infrastructure for customers and its failure to do so lead to the major March 2 outage.
“Due solely to its own negligence and failure to maintain adequate infrastructure, Robinhood breached obligations owed to plaintiff and class members and caused them substantial losses,” contends the Robinhood class action lawsuit.
“Its failures are all the more serious due to Robinhood’s history of such failures, the magnitude of the outage, the absence of alternative means for customers to protect their investments and lack of communication and customer support.”
Prendergrast claims that, during the outage, he was unable to contact any customer service support, despite many attempts to do so.
He says that he wanted to sell his options, but was barred from doing so due to the app’s failure.
To make matters worse, alleges the complaint, Robinhood sold his “puts” without his authorization during the outage for $30 and credited his account.
“Puts” or put options are contracts that allow the owner to sell or short sell an amount of an underlying security during a pre-arranged time frame.
The Robinhood class action lawsuit notes that the platform has apologized for the outage. However, despite these apologies, the platform allegedly experienced additional outages later that day.
This is the second Robinhood class action lawsuit filed over the March 2 outage. In a Florida federal court, another plaintiff says that he and other customers were unable to access the New York Stock Exchange for all but a few minutes of the day that happened to feature the biggest point gain in a single day.
In other news, Robinhood has reportedly paid into a $1.25 million settlement over charges made by the Financial Industry Regulatory Authority that the platform’s brokers were optimizing trades. However, despite these scandals, the platform has also been incredibly successful and was reportedly valued at $7.6 billion in 2019.
The California Robinhood class action lawsuit seeks to represent a nationwide Class of those who held an option contract through their Robinhood trading account that expired during the March 2 outage.
Were you affected by the March 2 Robinhood outage? Did you lose money or lose out on an investment opportunity? Tell us your story in the comment section below!
The lead plaintiff and proposed Class Members are represented by William R. Restis of The Restis Law Firm PC and Joseph J. DePalma, Steven J. Greenfogel and Jeremy Nash of Lite DePalma Greenberg LLC.
The Robinhood Class Action Lawsuit is Prendergast v. Robinhood Financial LLC, et al., Case No. 5:20-cv-01877, in the U.S. District Court for the Northern District of California.
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47 thoughts onRobinhood Class Action Alleges Harmful System Crash
Please add me.
The previous comments have said it all!!
Please add me!!
Add me
I was also affected by this. I had just recently started with this app and when i seen the crash starting i wanted to get it but i was tied for over 24 hours.
Count me in. I tried to do transactions atleast 40 times that day to no avail. I wasn’t offered anything in return and emailed them twice. I had roughly $1000 tied up. I still haven’t fully recovered
The app froze when I was transferring money over on 3/17 causing a duplicate transaction ($1,000 twice) without notifying me. The account it transferred from is not my main account so the duplicate transfer caused me to overdraft. The transaction was still pending so I called my bank the next day or so and had them cancel the transfer (and reverse the overdraft fee). This caused Robinhood to automatically freeze my account without a notice. I was able to sell out of my positions but I could not get a hold of anyone in Robinhood support to reactivate my account. After selling all my stocks my account has been frozen completely since 3/25. I can not even transfer my money back to my bank account. I have sent over 10 emails to support and have only received auto replies saying they are looking into it.
This is unacceptable and I will be looking into legal action as well. Please contact me if you think I have a case worth pursuing (44K is being held hostage right now).
Thanks.
My issue was on December 12th of 2018 – (then seeing online it was happening to many people) – I had ACVI options, about 17 – dates ending in 1 /1 / 21 or so. Far out, Always available for sale, and thats how I set them up to sit. I log in on the day in question, feel horrible for the person if it was a person, but 14 options were sold, in 3 transactions. the total was about 33,000. Just out of college I felt more comfortable with my sold options out of Robinhood. I go to increase my Margin available amount (was able to do) and then when aiming to send to my bank, the whole thing froze. When I was able to get back in, my account was emptied as I had many important sales to make on options ending and such, that I was unable to do. I plan to contact FINRA until finding this site. Back to the story. After the Freeze, I find the Accounting firm that they had been using is no-longer the same, and in my opinion the information on my statements (or missing statements) has all let me to the fact something seems to have been Illegal. I say this, because if I accidentally were to buy a stock that was $1, however I type 1000. The person who sold me that stock would have the 1000 for it and I would be hurting making such a mistake.. Back to my statement. While it was frozen it changed my monthly statement for the month, and on each of the 3 transactions it shows first my sale as (Sale) in the transaction column, however the next item is (Scxl) with the money being removed from my account. It seems Illegal to be reversing my account without any involvement & deception being practiced by the company. Not only did it take a while for a response from them, but in total, they ended with suck wind, and gave me a $75 gift card to Amazon for “all your trouble”. Any help, or time considering my situation is very much appreciated. I wish you all the best during this outbreak.
I was not able to trade for 2 days and was stuck with trades losing money due to outage.
I echo what everyone said above. They alleged that they are handling on a case by case basis yet offered everyone $75.00. That’s dishonest and misleading. Their website failure cost everyone and they need to make it right. Their attempt to skirt the responsibility for this failure was unacceptable. I’d like to join any lawsuit against them.
I lost close to 4k between March 2nd and 3rd. Was also offered the $75. Have not docu-signed yet saying I will not go after them as I would like to consider the other possibilities. As of now add me to the list and I would like an email response as to what our potential case looks like. Thank you
I lost thousands of dollars and was offered $75. INSULTING to say the least. Was told it would be determined on a case by case, yet we are all being offered the same amount. They are misleading me with their communications. They are worth BILLIONS and now are throwing us change.
SAME BOAT Brother – if I get any notice that may help u ill send em ova thru this comment thing