The DoorDash plaintiffs had valid wage claims. Here, according to Reuters' analysis of the agreeement^1, RobinHood plaintiffs do not have a valid contract claim. There is no breach of contract because the agreement specifically allows for RH to silently refuse to execute orders. What can RH customers sue RH for? If there is no valid claim they can make, then there's no possibility of arbitration.
I am cautiously optimistic that this issue (which seems to have drawn “outrage” from both sides of the political spectrum) will spur some change with respect to contracts of adhesion that force arbitration and prohibit class action suits. It’s nearly impossible to hold a corporation accountable for wide-spread anticonsumer behavior in any meaningful way so long as they can tuck those two paragraphs into a massive contract most people don’t read and even fewer will understand.
You can not overwrite a law by making anybody signup user agreement.
This was clearly a stock manipulation played in our faces, no need o prove anything. Only left is to see if the justice exist in EEUU.
This is not a “user-based” restriction (which I guess is what the law intended to mean) but a wholesale restriction without per-customer reasoning, without notice and without equivalent counterpart (they did not block selling)... At least it is worth looking into.
"It will be hard to prove users suffered as a result of Robinhood’s measures because GameStop and other stocks covered by the curbs fell sharply on Thursday after the restrictions were announced, said James Cox, a professor at Duke Law School."
Wait, what? Can anyone legitimately make the claim that the massive drop in value that cut off the price rise at the knees and allowed the worst short positions to cover their losses sub-$200 didn't materially harm the users? This is absolute madness.
This happens in every thread about every subject. Most users don't know anything, any expert will tell you it's the case when their subject is discussed here. The onus is on the knowledgeable to educate and correct and help and be charitable, and we usually see this.
We shouldn't try to shame or label users without at least trying to help first. Try to improve a situation and not make things worse. That way HN gets better.
It's very disappointing. I don't expect people to know these things. But on HN, I'd expect them to ask or listen or read about it. Instead people just post about how it's a big finance conspiracy and how they're going to sue everyone...
Why? Surely them blocking buys for any individual (or even small group of them) is within their rights per their customer agreement. But blocking them en masse is market manipulation, and their tos isn’t going to protect them from that.
My understanding is just because something meets the layman definition of, say, “market manipulation” doesn’t mean it meets the legal definition of that. This also applies to things like recklessness - the legal definition and the layman definition are different.
Furthermore, AFAIK it’s not that something like “market manipulation” is illegal - it’s usually more complex than that, and might only be illegal under circumstances XYZ.
It’s tempting to read laws as if they’re written in plain English, but it’s really more like a specialized dialect where words and phrases have different (and often complex) meanings.
Market manipulation requires intent to artificially change the stock price. It isn't everything that changes the stock price otherwise any large organisation or person with clout would be constantly market manipulating all day long.
Why can't non-Robinhood holders of GME sue Robinhood, though? If you can prove that RH's actions drove the stock down, then aren't they the victims (and also not bound by the user agreement)?
>If you can prove that RH's actions drove the stock down
That'd at best, prove harm, which is a necessary but not sufficient condition for a successful lawsuit. You'd also need to prove wrongdoing, which is hard because they seemed to have acted so they can fulfill their deposit requirements.
In Europe, mandatory arbitration are usually unlawful. European Union Council Directive 93/13 on Unfair Terms in Consumer Contracts creates a rebuttable presumption that pre-dispute arbitration clauses in consumer contracts are invalid. The reason is the unequal bargaining power between the contracting parties in consumer contracts.
I don't necessarily support forced arbitration but... I would rather not pay the court fees because a bunch of people are upset their broker didn't accept their orders and want to waste the courts time over it.
Robinhood won’t go out of business because of lawsuits, it’ll be an exodus of users.
Even if they just weren’t prepared and everything they did was legitimately the right thing to do, that ship has sailed. I know people I didn’t even know had a Robinhood account ask me if I was shutting my account down too.
This will be fascinating to watch. Can the repair the brand damage? I’m skeptical.
Is there any similar scenario that has occurred at another brokerage firm in the past that might leave clues to examine to understand potential user actions here?
I don't have a Robinhood account, and I'm not involved in the GME/WSB stuff, but I would think twice about opening a Robinhood account now.
Indeed, it's been educational about which brokers are using other clearing houses (sorry if I get the terminology wrong), and which are direct.
But then badly behaved businesses like Godaddy don't seem to suffer or go out of business, so I suspect Robinhood won't have too many long term problems.
Each FINRA arbitration case would be expected to cost the company up to 10,000 in fees. If anywhere near the 100,000 users who left negative reviews on the Google Play store for the app file an arbitration and pay the filing fee, Robinhood will absolutely go bankrupt.
This is a very good point, the question is where to go? I am European, we don't even have Robinhood here, so I had a dead eToro account with 140 EUR on it and Interactive Brokers, which we all thought was synonymous with quality and respect. However, they folded first, along with Degiro, which was the other "well-reputed" option available to us. Everyone started running to XTB, which limited trading on Friday afternoon/night.
In the US there is Webull, which went against their clients initially and then reversed. As an European - where should I go to? Binance/Kraken seems the only reasonable option at this point, however crypto has ties to the real world only on macro-economic scale (although very relevant) and you cannot use your "capital" to influence the world around you in a good way.
I seriously doubt it will be even a blip on their radar. In fact, I think this will be their “no such thing as bad publicity” moment and they will have massive growth. People have short memories (no pun intended) and the switching costs are also nontrivial.
Even without the user exodus I’d think there’s cause for concern regardless.
They’ve said their financial position is stable, yet they’re stopping trades because of the volume moving through their clearance system (if I’ve understood what Vlad was saying to Bloomberg correctly, they no longer use an external clearing house).
If it walks like a duck, and it quacks like a duck, then it’s probably a duck. And it’s probably good that it’s walking as it doesn’t sound like there’s a whole lot of liquidity left to swim in.
I worry about this for other massive firms, even leaving the current circus aside. As unlikely as it might seem, what happens if a Schwab or a Fidelity or a Vanguard gets into trouble from some as-yet-unseen event?
Their messaging around this has been a total self-own. I don't know whether they're trying to protect their relationship with the DTCC or something else, but Vlad's lack of clarity understandably makes most people blame RobinHood.
Robinhood canceled my GME calls orders at 1am and sent a message confirming that I canceled them (I didn't). Doesn't matter if they're technically in their rights or not the trust is shattered and I'm closing my account. Everyone else even in IRL spaces agrees with the sentiment. Anecdotally my barista at my local coffee spot told me to move to Webull or another platform so the sentiment seems to be widespread.
My bet is that this will be lasting to the point where Robinhood will need to change name. Out of the things people are a bit careful with and want full control of, their own money is distinctly one of those. The Robinhood story as it being describe include both forced sales, as well as not being allowed to user their money to buy stocks. Both seems pretty scary to would be new customers as well as existing ones.
As long as Robinhood offers excellent UX, people will return. Look how many claims over Facebook's digital privacy, including companies boycotting Facebook, and yet people still use it now. Good UX is hard to beat.
Within 2 hours of this happening I personally know of at least $2m leaving robinhood accounts. Everyone (and I mean literally everyone) I know that used robinhood are closing their accounts.
I agree. They're in big trouble after this. I think a lot of people actually will switch. If they really have an IPO after this, expect a lot of madness.
Now I see the value of Bitcoin and Ethereum. Can we build an exchange on Ethereum? Maybe handling high number of transactions will still be a problem. Can we accept the delay for the benefit of decentralization?
Can anyone with Robinhood confirm what kind of agreement this is? Is it just a EULA? Obviously IANAL, but I cannot see how such agreements are legally binding if they don't even require a signature.
In a theoretical world where I had to sign a EULA, I'd never sign any of them and I imagine most people wouldn't either.
I checked the Robinhood tos and it looks like they have a forced arbitration clause anyway. I'm not sure why the class action efforts thought they could get anywhere.
That said, I'm pretty sure you could make Robinhood fold if the users all bombed them with arbitration filings.
Who is trying to sue Reddit for this? Bringing them up just sounds like building a case for repealing Section 230 of the DMCA, which would be a disaster but nevertheless seems to have bipartisan support.
These complaints need to reframed in terms of the sellers of the extremely underpriced call options that triggered the insane volatility in the first place. There are only a tiny number of companies responsible, possibly as few as one
Robin hood users certainly weren't clicking around a UI buying stocks fast enough to cause the incredible moves witnessed, that could only be the action of the option market makers attempting to hedge options they'd sold to those users with a notional value vastly exceeding available liquidity
Robinhood would be liable for any margin accounts that were unable to settle their balances by the end of the allotted term. It's very reasonable that they restricted trades based on their liability.
Did it have the deleterious affect of negatively impacting anyone long on the stock, probably. But, was that the primary rationale? It'll have to come out in discovery.
The fact that they’ve not only limited trading in GME but low volatility name like Starbucks to 1 share is ridiculous. If the only outcome out of this is collective realization about issues with Section 230 or forced arbitration that is a positive whether this class action becomes anything or not.
I'm not sure why this article talks about reddit at all. I'm not aware of anyone suing reddit or even considering it (unless the hedge funds plan to do so?).
It seems like they just wanted an excuse to write an article about Section 230, or had already written it when it was a big topic earlier in the month and wanted to use what they wrote elsewhere. :)
[+] [-] kleton|5 years ago|reply
[+] [-] jcranmer|5 years ago|reply
[+] [-] 1vuio0pswjnm7|5 years ago|reply
1. https://web.archive.org/web/20200217224304/https://cdn.robin...
[+] [-] elliekelly|5 years ago|reply
[+] [-] gutino|5 years ago|reply
[+] [-] jerry80|5 years ago|reply
[+] [-] pfortuny|5 years ago|reply
[+] [-] mdorazio|5 years ago|reply
Wait, what? Can anyone legitimately make the claim that the massive drop in value that cut off the price rise at the knees and allowed the worst short positions to cover their losses sub-$200 didn't materially harm the users? This is absolute madness.
[+] [-] 8ytecoder|5 years ago|reply
https://www.bloomberg.com/opinion/articles/2021-01-29/reddit...
[+] [-] thinkingemote|5 years ago|reply
We shouldn't try to shame or label users without at least trying to help first. Try to improve a situation and not make things worse. That way HN gets better.
[+] [-] LatteLazy|5 years ago|reply
[+] [-] abotsis|5 years ago|reply
[+] [-] 542458|5 years ago|reply
Furthermore, AFAIK it’s not that something like “market manipulation” is illegal - it’s usually more complex than that, and might only be illegal under circumstances XYZ.
It’s tempting to read laws as if they’re written in plain English, but it’s really more like a specialized dialect where words and phrases have different (and often complex) meanings.
[+] [-] austhrow743|5 years ago|reply
[+] [-] awillen|5 years ago|reply
[+] [-] gruez|5 years ago|reply
That'd at best, prove harm, which is a necessary but not sufficient condition for a successful lawsuit. You'd also need to prove wrongdoing, which is hard because they seemed to have acted so they can fulfill their deposit requirements.
[+] [-] nceqs3|5 years ago|reply
[+] [-] why_Mr_Anderson|5 years ago|reply
[+] [-] LatteLazy|5 years ago|reply
[+] [-] ericmay|5 years ago|reply
Even if they just weren’t prepared and everything they did was legitimately the right thing to do, that ship has sailed. I know people I didn’t even know had a Robinhood account ask me if I was shutting my account down too.
This will be fascinating to watch. Can the repair the brand damage? I’m skeptical.
Is there any similar scenario that has occurred at another brokerage firm in the past that might leave clues to examine to understand potential user actions here?
[+] [-] vertis|5 years ago|reply
Indeed, it's been educational about which brokers are using other clearing houses (sorry if I get the terminology wrong), and which are direct.
But then badly behaved businesses like Godaddy don't seem to suffer or go out of business, so I suspect Robinhood won't have too many long term problems.
[+] [-] kleton|5 years ago|reply
If you are/were a Robinhood user: https://www.finra.org/arbitration-mediation/initiate-arbitra...
[+] [-] llcoolv|5 years ago|reply
In the US there is Webull, which went against their clients initially and then reversed. As an European - where should I go to? Binance/Kraken seems the only reasonable option at this point, however crypto has ties to the real world only on macro-economic scale (although very relevant) and you cannot use your "capital" to influence the world around you in a good way.
P.S. I know that Fidelity and other well-reputed vendors didn't turn coats, but I am not sure it is an option here. P.P.S. This reminded me of https://www.investopedia.com/terms/t/tina-there-no-alternati....
[+] [-] boatsie|5 years ago|reply
[+] [-] headmelted|5 years ago|reply
They’ve said their financial position is stable, yet they’re stopping trades because of the volume moving through their clearance system (if I’ve understood what Vlad was saying to Bloomberg correctly, they no longer use an external clearing house).
If it walks like a duck, and it quacks like a duck, then it’s probably a duck. And it’s probably good that it’s walking as it doesn’t sound like there’s a whole lot of liquidity left to swim in.
I worry about this for other massive firms, even leaving the current circus aside. As unlikely as it might seem, what happens if a Schwab or a Fidelity or a Vanguard gets into trouble from some as-yet-unseen event?
[+] [-] ummonk|5 years ago|reply
[+] [-] unknown|5 years ago|reply
[deleted]
[+] [-] jsonne|5 years ago|reply
[+] [-] belorn|5 years ago|reply
[+] [-] almost_usual|5 years ago|reply
I would imagine most users care more about money and convenience than principles. I doubt they lose many users in the long run.
If the bubble or market crashes though they will lose a large user base for a long period of time.
[+] [-] ll931110|5 years ago|reply
[+] [-] lettergram|5 years ago|reply
[+] [-] kilroy123|5 years ago|reply
[+] [-] chrischen|5 years ago|reply
[+] [-] thinkingemote|5 years ago|reply
They basically said they were deeply sorry, didn't try to cover up and blamed their bank and clearinghouse.
[+] [-] PeterStuer|5 years ago|reply
[+] [-] skizm|5 years ago|reply
[+] [-] ffggvv|5 years ago|reply
[+] [-] powerapple|5 years ago|reply
[+] [-] lucasyvas|5 years ago|reply
In a theoretical world where I had to sign a EULA, I'd never sign any of them and I imagine most people wouldn't either.
[+] [-] tengbretson|5 years ago|reply
That said, I'm pretty sure you could make Robinhood fold if the users all bombed them with arbitration filings.
[+] [-] andrewflnr|5 years ago|reply
[+] [-] dmw_ng|5 years ago|reply
Robin hood users certainly weren't clicking around a UI buying stocks fast enough to cause the incredible moves witnessed, that could only be the action of the option market makers attempting to hedge options they'd sold to those users with a notional value vastly exceeding available liquidity
[+] [-] relaunched|5 years ago|reply
Did it have the deleterious affect of negatively impacting anyone long on the stock, probably. But, was that the primary rationale? It'll have to come out in discovery.
[+] [-] Cambro320|5 years ago|reply
[+] [-] tempsy|5 years ago|reply
[+] [-] jedberg|5 years ago|reply
It seems like they just wanted an excuse to write an article about Section 230, or had already written it when it was a big topic earlier in the month and wanted to use what they wrote elsewhere. :)
[+] [-] dang|5 years ago|reply
[+] [-] azinman2|5 years ago|reply
[+] [-] tommoor|5 years ago|reply