The stock trading app Robinhood was hit with a class-action lawsuit on Thursday (Jan. 28) after users accused the company of restricting trading.
The suit, which was filed in the Southern District of New York, alleges that Robinhood “purposefully, willfully and knowingly removed the stock ‘GME’ [GameStop] from its trading platform in the midst of an unprecedented stock rise thereby deprived retail investors of the ability to invest in the open-market and manipulating the open-market.”
Under Robinhood’s restrictions, users were allowed to close out their existing trades, but were not allowed to purchase new stocks for companies such as AMC, GameStop and BlackBerry.
On Wednesday (Jan. 27), GameStop’s shares jumped from $64 to $327 after a group of investors on Reddit banded together to force the monumental increase. “It’s quite remarkable and myself, my colleagues and professional traders, we’ve never seen anything like it,” said Northwestern University professor Matthew Lyle. “There’s some risks for some people, that’s for sure, but it’s just very curious this has been pulled off.”
Robinhood explained that the market’s “volatility” led them to stop users from purchasing the stock. “We continuously monitor the markets and make changes where necessary. In light of recent volatility, we are restricting transactions for certain securities to position closing only,” the company wrote.
Robinhood faced criticism from many people after the company began to regulate the trading. Ja Rule took to Twitter on Thursday (Jan. 28) to encourage his followers to keep their shares. “Yo this is a fucking CRIME what [Robinhood] is doing DO NOT SELL!!! HOLD THE LINE... WTF,” he tweeted.
Following his advice, the hashtag #HoldTheLine began trending on Twitter. The “Put It On Me” emcee then called Robinhood’s actions unlawful. “They hedge fund guy shorted these stocks now we can’t buy them ppl start selling out of fear... we lose money they make money on the short... THIS IS A FUCKING CRIME!!!” he wrote.