Robinhood Gets Hit With $70M Fine After GameStop Frenzy

Woman holding money

The Financial Industry Regulatory Authority, or FINRA, fined Robinhood $70 million and ordered the stock trading company to pay nearly $13 million in restitution to clients.

According to the FIRNA’s official statement, the popular investing app was forced to pay a $57M fine and $12.6 million to thousands of members due to numerous allegations concerning “widespread and significant” harm on multiple different fronts over the past few years.

“This action sends a clear message—all FINRA member firms, regardless of their size or business model, must comply with the rules that govern the brokerage industry, rules which are designed to protect investors and the integrity of our markets. Compliance with these rules is not optional and cannot be sacrificed for the sake of innovation or a willingness to ‘break things’ and fix them later,” said Jessica Hopper, Executive Vice President and Head of FINRA’s Department of Enforcement.

At the peak of 2021, GameStop made headlines after Reddit users agreed to buy GameStop call options and increase the retailer shares to unprecedented levels. Robinhood imposed restrictions on sales of inventories by several companies.

The report also referred to a tragic customer’s history with details similar to those of the 20-year-old Alex Kearns, an investor who died by suicide in June 2020. Kearns took his own life last year after the 20-year-old thought he was nearly $1 million in debt

FINRA found his balance inaccurate and his position value to be half that which the account showed.

” ‘How was a 20-year-old with no income able to get assigned almost $1 million worth of leverage?’ These were the last known written words of 20-year-old Alex Kearns before he rode his bicycle to a railroad crossing and ran in front of an oncoming train,” the family of Alex Kearns wrote in the court filing.

Several individuals are still outraged by the unethical action by Robinhood and feel that the $70M fine was merely a slap on the wrist. Stock market expert, Dave Lauer, spoke out about the newly issued fine, saying, “Big enforcement case by FINRA – $70M fine to Robinhood for “systemic supervisory failures and significant harm suffered by millions of customers.” This is a $57M fine and $12.6M in restitution to clients. Doesn’t even come close to a single Q of profit.”

“FINRA found that Robinhood’s mission to ‘de-mystify finance for all’ was bulls*** – and that they ‘negligently communicated false and misleading information to its customers.’ This includes misleading information on margin, and even how much cash was in your account.”

The chaos surrounding Robinhood furthermore proves that potent forces protect the interests of the ultra-wealthy, and  that the system has been carefully designed for them to succeed.


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