Robinhood, a platform supporting cryptocurrencies and stocks, is facing several allegations of market manipulation as part of a class-action lawsuit. The lawsuit has been tabled by investors in nine companies involved in the meme stocks frenzy witnessed in January last year.
Robinhood faces a class-action lawsuit
A report published by Reuters on Thursday said that investors in several companies, including GameStop and AMC, had been given the go-ahead by US District Court Judge Cecilia Altonaga of the Southern District of Florida and could go on with the lawsuit accusing Robinhood of providing fake supply figures of these stocks.
In January last year, the price of cryptocurrencies such as memecoins such as Dogecoin increased to all-time highs after a subreddit group known as r/Wallstreetbets recorded a notable uptick in interest in some stocks and cryptocurrencies.
After these stocks started to increase in value, the platform suspended the purchase of GME stocks and other assets after they started recording a massive gain. The rise in the prices of these stocks created a rift between retail investors and large hedge funds on Wall Street shorting these stocks.
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After the heightened activity around these stocks, thousands of Robinhood users gave one-star reviews for the Robinhood app on Google Play Store. The exchange also suspended plans for its initial public offering (IPO) in the US. Several class-action lawsuits were also filed against Robinhood, claiming that the exchange was playing to the interests of hedge funds following its previous relationships with Citadel and Melvin Capita.
The meme stock controversy of 2021 also made the platform the target of several US lawmakers seeking an explanation on the matter. The CEO of Robinhood, Vlad Tenev, testified before a House Financial Services Committee hearing in February 2021.
On August 2, the New York Department of Financial Services announced that Robinhood Crypto would pay a $30 million penalty to the New York state for failing to comply with the Bank Secrecy Act/Anti-Money Laundering obligations.
Robinhood set to lay off staff
Robinhood released its financial results for Q2 2022, with Tenev adding that the exchange planned to lay off 23% of its staff. The Robinhood CEO said that reducing its workforce by 9% in April did not significantly impact the trading platform. The shares of the company are also attempting a recovery, and they are up by over 26% over the past month.