Robinhood has been slammed with a class action lawsuit leveled against the company for its actions regarding meme stocks last year. According to the filing details, the class action is being pursued by several investors who held the different meme stocks at the period on the platform. A verdict that was delivered by Judge Altonaga of a court in Florida gave the investors the go-ahead to pursue the case against the company. With that, the brokerage platform looks set to spend most of the coming months in a courtroom defending its actions during the period.
Investors claim Robinhood was acting for hedge funds
According to further details of the filing, the investors alleged that Robinhood was found guilty of inflating the supply of diverse stocks during the period. GameStop, AMC, and some other stocks were the assets involved in their shady dealings in the period. At the time, the stocks and other digital assets tokens like Dogecoin saw bullish returns to break above and register massive price increases.
Robinhood placed a temporary suspension on the purchase of these tokens when the price looked set to hit a new all-time high. Although the platform later opened up for buys, a fight ensued on the firms motives for institutional investors against retail investors. The following months saw users leave bad reviews of the platform while others challenged the platform to court for acting solely in the interest of hedge funds, one which it also owns.
HOOD stock is up by 26% despite issues
After the issues with investors, US lawmakers started to target the firm over its actions during the period. A committee was set up where CEO Vlad Tenev was invited to testify in February 2021. Asides from the issues regarding meme stocks, the Financial Services department also slammed Robinhood with a fine of $30 million for violating Bank Secrecy Act on August 2. However, away from the bad publicity that the company is gathering,, the CEO has announced that the platform will cut about 23% of staff in the coming days.
This is coming after not so impressive Q2 earnings where the company fell short of its projected financial returns. Notably, the company already cut about 9% of its employees some months ago, citing issues related to the market downturn affecting its activities. Despite the issues surrounding the company, its native stock, HOOD is still making a turn for the turn, with the token currently seeing a bullish return to trade at $10.59, up by 26% in the last month.