Vernon Litigation Group files Investor Arbitration with FINRA against Robinhood Financial, LLC and Robinhood Securities, LLC


NAPLES, Florida, August 31, 2021 / PRNewswire / – Complaint filed by Vernon Litigation alleges Robinhood improperly imposed trade restrictions on Blackberry Ltd. (BB) earlier this year. Some of the details of the claim are shown below.

Cyber ​​experts often warn that you should be wary of participating in anything that is offered “for free” in the high tech world, as this usually means that you are effectively associated with others and turned into a product or service. sell or operate. by the high-tech company. Robinhood is a prime example of this abuse. Robinhood attracts customers with the offering of “free” services and, in turn, Robinhood aggregates the “free” transactions of its customers and then sells the ability to perform those transactions to other financial firms who are paid to perform. actually transactions. Robinhood receives massive payments from these “major trading companies” or “electronic market makers” for the ability to get Robinhood’s customer order flow (“order flow payment”). Although Robinhood says it represents a change from the old ways brokerage firms profit from their own client base, this payment for order flow that has enriched Robinhood is a very traditional Wall Street practice.

Since Robinhood launched its “free” trading platform and purported new way of doing business, order flow payment has been its biggest source of income, with one market maker in particular, Citadel Execution Services, accounting for almost half of the total Robinhood payments received from all market makers in 2020. Think of Robinhood as a middleman who takes trading orders from its clients, aggregates them into numerous transactions, and then gets paid by Citadel to enable Citadel conduct these transactions for a fee that derives from the trade proceeds.

In the context described above, the shares of BlackBerry Ltd. started to increase earlier this year. Part of this was because Robinhood’s clients were buying a large number of BB shares (and other heavily shorted stocks) which drastically increased the price of the shares and led to what is known as a “short squeeze”. Due to rising stock prices and the threat of potential losses, short holders began to close their short positions to avoid further losses and buy stocks in case the broker who loaned them demanded them. feedback actions. As a result, the BB share price rose further.

Several large Wall Street hedge funds and investment firms, including Citadel Enterprise Americas LLC, Citadel Securities LLC and Melvin Capital Management LP (“Melvin Capital”), were among the investors who held large short positions in BB. As a result, these hedge funds were exposed to huge potential losses as BB continued to rise due to transactions by Robinhood clients and others. To protect these hedge funds (which paid Robinhood huge sums of money for order flow), Robinhood brutally banned its own clients from buying shares and exercising BB options. Robinhood’s stop in BB trading was not a general stop but a stop against buying that would put upward pressure on the BB stock market.

Given the nature of Robinhood’s relationship with Citadel and other short sellers, Robinhood has promoted its own interests at the expense of its own clients. In effect, Robinhood pushed the market price in the direction that it wanted it to go to the benefit of Robinhood’s real clients (hedge funds and other electronic market makers), to the detriment of its “free” clients. he tapped into mainstream Wall Street. fashion.

Based on the foregoing allegations, among others, the FINRA complaint is now being prosecuted against Robinhood.

Vernon Litigation Group is a financial litigation law firm with offices in Naples, florida and Buckhead, Georgia who represents clients in courtroom disputes, arbitration including FINRA arbitration, negotiation and mediation throughout United States. Our attorneys have collectively represented hundreds of investors in financial litigation in national arbitrations and litigation, and have recovered millions of dollars from purported financial professionals and financial institutions large and small. Please contact us to discuss your rights if you believe that a financial or investment professional has not acted in your best interest or has abused your trust in relation to insurance or investment products. other investment products or services. For more information, visit our website or contact us by phone at 1-877-649-5394 or by email at [email protected] to speak with a representative from Vernon Litigation Group.

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Chris Vernon | 239-319-4434

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