Vlad Tenev, CEO and Co-Founder of Robinhood, in his office on July 15, 2021 in Menlo Park, California.
Kimberly White | Getty Images Entertainment | Getty Images
Robinhood executives had a lot to talk about the week Reddit users were driving a historic short squeeze in GameStop.
New documents in a lawsuit allegedly show internal conversations between executives panicking over how to meet financial requirements, debating the severity of a Reddit-driven short squeeze and contradicting the CEO’s public statements.
Plaintiffs in the claim, which was filed in the U.S. District Court in the Southern District of Florida, allege they suffered damages when Robinhood enacted trading restrictions on Jan. 28 amid volatile activity in GameStop and other meme stocks. They are suing for damages, interest and attorneys’ fees. Plaintiffs are also seeking class action status.
“As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits,” the brokerage said in a Jan. 28 blog post addressing the trading restrictions. “Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment.”
According to the suit, in one instance, Robinhood Chief Operating Officer Gretchen Howard messaged internally that the start-up was facing a “major liquidity crisis.” Publicly, the company’s chief executive said the opposite.
“There was no liquidity problem,” CEO Vlad Tenev told CNBC’s Andrew Ross Sorkin a day later, on Jan. 29.
A Robinhood spokesperson said the start-up met its liquidity obligations on January 28, and “fully satisfied its clearinghouse deposit requirement before the market opened.”
Sharp rise in trading volume
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