Stock market trading app Robinhood has agreed to settle a proposed class action lawsuit, over claims outages on its app cased investors to lose money during a period of pandemic-related stock market volatility.
The lawsuit comes after retail investors flocked to the app in the midst of the pandemic, in their efforts to battle hedge funds and short sellers, by buying up shares in “meme stock” companies such as Gamestop and AMC Entertainment.
First launched in 2013, Robinhood set out to democratise stock markets by pioneering commission free trading of stocks, ETFs, and cryptocurrencies, via its mobile phone app.
However, the firm’s app suffered three separate system-wide outages on the 2nd, 3rd, and 9th of March 2020 during a period of pandemic related volatility, which saw the Dow Jones index generate its largest daily point gain in the entirety of its history.
Investors now claim they lost money due to not being able to trade on the volatility during the Robinhood app’s outages.
The settlement comes after US regulators fined the California tech firm $70m for the systemwide outages and misleading communications, in the largest fine ever issued by the US Financial Industry Regulatory Authority (FINRA).
In January, a judge also dismissed a separate class-action lawsuit over Robinhood’s decision to temporarily restrict investors from trading “meme stocks” in January 2021 during a rally in shares of Gamestop, AMC, and other popular shares.