Massachusetts wants to pull the plug on Robinhood

Massachusetts wants to pull the plug on Robinhood

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To state their case, state regulators have accused Robinhood of failing to properly account for fractional shares traded by customers on its platform, saying the company “continues to lure and attract inexperienced customers to risky trading” track.”

The Massachusetts incentive to revoke Robinhood’s license is another obstacle facing the company as it prepares to become known after it filed a confidential complaint late last month. The big question is whether the legal and PR problems of Robinhood will be important for investors compared to the breathtaking growth of the business.

In a blog post, Robinhood sharply criticized what he described as “unfounded, politicized allegations and unreasonable demands” from regulators in Massachusetts, warning that revoking its license would block millions of customers’ access.

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“The Massachusetts Securities Division’s effort to prevent Massachusetts residents from choosing how they invest is elitist and against everything we stand for,” Robinhood said. “We do not believe our clients are naive as the Massachusetts Securities Division paints them.”

Robinhood fired back by filing a complaint and a motion in Massachusetts State Court for a preliminary injunction that would stop the lawsuit against the company. Robinhood argues that the regulator’s new rule of trust “exceeds its authority” under state as well as federal law.

“By trying to block Robinhood, the department is trying to bring its residents back in time and reinstate the financial barriers that Robinhood has created to break down again,” Robinhood said in the blog post.

More than just confetti

The fight began in December when regulators in Massachusetts filed a 24-page complaint against Robinhood in which they accused the company of violating laws and regulations by failing to protect customers and protect the system. Officials allege that Robinhood lured inexperienced investors to its platform with game elements such as colorful confetti – a practice the company recently said it was getting rid of.

The amended complaint filed Thursday says Robinhood has continued a pattern of attracting customers aggressively, including some with ‘little or no investment experience’. It cites news reports indicating that Robinhood has expanded margin lending and sought to persuade customers to deposit their stimulus checks by offering ‘free cash’ for deposits.

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Robinhood’s behavior since the complaint was filed in December poses a significant and ongoing risk to Massachusetts investors, the complaint reads.

Regulators in Massachusetts said Robinhood had not reported fractional stock trading for more than a year.

Increasing growth

The battle with Massachusetts contributes to a long list of issues Robinhood has been dealing with over the past few months.

CEO Vlad Tenev was dragged before Congress earlier this year amid investigations into Robinhood’s trade restrictions during the GameStop unrest. Robinhood was also fined $ 65 million by the SEC for allegedly misleading customers.
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The company was sued by the parents of a 20-year-old trader who killed himself after seeing a negative balance of $ 730,000 in his trading account and mistakenly believed it was the amount he owed.

And yet, despite this tumultuous piece for Robinhood, the company continues to grow rapidly – especially in the crypto space.

During the first quarter alone, 9.5 million customers traded cryptocurrencies on Robinhood, according to the company. It has risen from just 1.7 million during the last three months of last year.

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