Can I Recover Losses Suffered Due to Robinhood Crash(es)?

Robinhood Securities is a broker-dealer registered with FINRA under Robinhood Securities, LLC and Robinhood Financial, LLC that provides “free stock” trading via its website and app with over 10 million users. On March 2, 2020 and March 3, 2020, many Robinhood users were unable to access their accounts, many suffering serious losses as a result.

This is not the first issue Robinhood has had lately with its platform. According to public records, Robinhood Financial, LLC was sanction in December 2019 by FINRA for, among other things, “not performing systematic best execution reviews of certain order types” and because “Robinhood’s supervisory system was not reasonably designed to achieve compliance with its best execution obligations.” Robinhood was fined $1,250,000.

Reports have been arising that users were unable to access their accounts with a variety of explanations being provided and speculation about a failure to code properly for the leap year. CNBC reported as follows:

“The technical problems took up most of the trading day and were not fixed before the close. Robinhood clients missed out on the biggest one-day point gain in the Dow Jones Industrial Average in history. 

‘We are experiencing a system-wide outage. We are working to resolve this issue as soon as possible,’ the company said in a message to clients Monday. With an hour left in the trading day, Robinhood updated clients saying, ‘the issue has been identified and a fix is being implemented.’”

https://www.cnbc.com/2020/03/02/robinhood-says-its-experiencing-a-system-wide-outage-as-markets-rebound-in-heavy-volume-monday.html

According to zerohedge.com a RobinHood spokesperson offered the following explanation:

“I’m on the comms team at Robinhood and wanted to confirm on background that the outage you covered was not caused by a failure to code for Leap Year. We had instability in a part of our infrastructure that allows our systems to communicate with each other. This resulted in outages across many of our services, preventing customers from using our app, website, and help center,” Robinhood’s Corporate Communications said. 

https://www.zerohedge.com/markets/millennials-marooned-robinhood-experiences-system-wire-outage

It also appears that Robinhood has started to offer what it is calling “Goodwill Credits” to affected customers, mostly of $75, but some have reported higher amounts. These “Goodwill Credits” amount to a settlement offer for pennies on the dollar of customers’ losses for which Robinhood requires the customers to sign a release which, among other things bars the customer from bringing any further claim (in FINRA arbitration or otherwise), does not admit any liability on the part of Robinhood, requires an agreement to confidentiality (including attempting to bind family members of the customer), prohibits the customer from saying anything negative about Robinhood (non-disparagement clause), and if Robinhood has to enforce any of these provisions, the customer would have to pay its attorneys’ fees. For some, the bird in the hand is worth it to simply take a small recovery and move on. However, if you are offered a Goodwill Credit settlement from Robinhood and are not happy with the amount offered, you cannot accept the credit and also bring a claim.

Regardless of what caused Robinhood’s failure to adequately provide the services it has contracted to provide, Robinhood may be responsible for the losses you suffered in your account. If you suffered significant account losses in your RobinHood account as a result of not being able to access your account, you may have a claim to recover your funds in a FINRA Arbitration. The Securities Lawyers practice group at Halling & Cayo, S.C. can help. We take cases all over the country, and we only get paid if we win. Contact us to set up a meeting to review your case.