Update – March 18, 2020 – Second Class Action Filed on Behalf of Robinhood Option Contracts Holders
Robinhood Financial, LLC has been hit with another proposed class action in California. The case looks to cover those in the U.S. who on March 2, 2020 held an option contract in a Robinhood trading account that expired on that date.
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Robinhood Financial, LLC finds itself on the receiving end of another proposed class action centered on the system outage that crippled the company’s securities brokerage platform from March 2, 2020 through the following day.
Echoing a case filed on March 4, the lawsuit says the 24-hour-plus outage, which ended on March 3 just before noon, prevented Robinhood users from buying or selling securities or exercising options contracts on the defendants’ website, app or call center. The case alleges that those who held options contracts that expired during the outage—which occurred on the first trading day of the month, when monthly options contracts typically expire—were unable to exercise the contracts or execute trades in order to capitalize on gains or to mitigate losses. According to the lawsuit, most of those options contracts, “if not all of them,” expired worthless due to the inability of Robinhood users to access the company’s trading services.
The suit alleges proposed class members—those in the United States who, on March 2, 2020, held a covered short position or an option contract expiring on that date in a Robinhood trading account—suffered “concrete, particularized, and actual damages.” For those who held short positions on March 2, the case says, the outage prevented the mitigation of losses while U.S. stocks surged to their highest point in 14 months due to investor confidence that the world’s largest economies would act concertedly to offset an impact from the coronavirus outbreak.
In offering trading services, Robinhood, the case argues, assumed a duty to ensure its systems could handle reasonably foreseeable customer demands and market conditions like those on March 2. The lawsuit alleges Robinhood and co-defendants Robinhood Securities, LLC and Robinhood Markets, Inc. failed to adequately or properly equip the platform in order to maintain customer access to trading services. With this failure, the suit claims, Robinhood “thereby breached its obligations and caused its customers substantial losses” as a result of its “negligence and failure to maintain adequate infrastructure.”
The plaintiff, a New York resident, claims he lost roughly $6,000 after being unable to sell his options contracts on the Robinhood platform on March 2.