App Faces Consequences for Unfriendly Practices
Earlier this year, Robinhood, a popular stock-trading app, experienced a massive increase in user activity due to the GameStop short squeeze frenzy. Users flocked to the app round the clock to take advantage of the situation. However, this heightened attention may have backfired on Robinhood.
The Financial Industry Regulatory Authority (FINRA), a federal organization overseeing financial firms, released a 123-page complaint accusing Robinhood of misleading users about their investments, leading to financial losses and harm. Additionally, Robinhood was blamed for inadequate technology maintenance and approving complex trades without sufficient research. As a result of these allegations, Robinhood was slapped with a record-breaking $70 million fine by FINRA.
FINRA’s complaint highlighted the tragic case of 20-year-old Alex Kearns, who tragically took his own life after seeing a falsely negative balance of $750,000 in his Robinhood account. Kearns tried reaching out to the app’s support but received no response.
“I lost the love of my life. I miss him more than anything,” expressed Kearns’ grieving mother, Dorothy Kearns, in an interview with CBS. “It’s the kind of pain that I don’t think should be humanly possible for a parent to overcome.”
Robinhood fined $70 million by FINRA for options trading issues and service outages. @Kr00ney reports. [Link to CNBC tweet]
— CNBC (@CNBC) June 30, 2021
The case of Kearns serves as a glaring example of Robinhood’s alleged misconduct. FINRA’s complaint highlighted the app’s distribution of inaccurate and misleading information related to critical matters like customers’ account balances, risk assessments in options trading, and the possibility of margin calls.
While Robinhood has not admitted to the accusations, it has paid the hefty fine without objection.
