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Written by Krysten Zinon on March 27, 2023
Category: 
FTC Disclosure

What Is The Robinhood Trading Scandal?

Robinhood is a popular online stock-trading app that allows users to buy and sell shares without paying any trading commissions.

In January 2021, a group of Reddit users organized a coordinated effort to buy shares of GameStop, a struggling video game retailer.

The move caused the company's stock price to soar, catching the attention of other investors and leading to a frenzy of buying and selling.

Many people used Robinhood to make these trades, but the platform soon found itself in trouble.

What Happened With Robinhood?

As the demand for GameStop shares surged (as well as other stocks like AMC and BBBY), Robinhood was unable to keep up.

The company had to stop users from buying shares of GameStop and other hot stocks, which left many users frustrated and angry.

Robinhood's decision was driven by the fact that it didn't have enough collateral to cover the sudden surge in trades.

Robinhood Scandal

This incident led to accusations that Robinhood was favoring Wall Street over its own users.

Many people were upset that they were unable to trade on the platform, while big hedge funds were allowed to continue trading.

The scandal brought attention to the role of social media in financial markets and raised questions about the fairness of the system.

In the aftermath of the scandal, Robinhood faced several lawsuits and investigations.

$70M Fine Imposed

The company was fined $70 million by the Financial Industry Regulatory Authority (FINRA), the largest fine ever imposed by the agency.

Robinhood was also accused of misleading customers about its business practices, and it paid a $65 million fine to the Securities and Exchange Commission (SEC).

Despite these challenges, Robinhood continues to be a popular platform for investing, and has largely left this scandal in the past.

This article was generated using automation technology, and thoroughly edited and fact-checked by an editor on our editorial staff.

Article written by Krysten Zinon

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