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Robinhood is facing nearly 50 lawsuits over GameStop frenzy

nytimes.com

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Re: Robinhood is facing nearly 50 lawsuits over GameStop frenzy

#41

Post by gitdown42 »

VoodooJuJu wrote: post #11

I'm pretty skeptical of the negative attention Robinhood is receiving. It seems like the entities who actually acted in bad faith, the ones who attempted illegal shorts, are trying to divert attention. Like someone else said, Robinhood is just the fall guy here.

Robinhood deserves negative attention, but not for restricting trades to closing-ony. That appears to not have been much of a choice.

They do deserve a lot of negative attention for running a brokerage in a way that invited a lot of risk-ignorant retail traders to instantly trade into leveraged positions for which they should never have been qualified in the first place. Robinhood has the valuation it does because it brought leveraged day trading to the masses. As someone who worked at a brokerage and designed trading tools, leveraged day trading isn't for the masses.

Re: Robinhood is facing nearly 50 lawsuits over GameStop frenzy

#42

Post by Railsify »

ceejayoz wrote: post #30
Railsify wrote: post #25

Earlier quoted context omitted.

Were the shorts illegal? I keep seeing the accusation but I don't think it's possible to short sell a stock that you have not borrowed.

It's definitely possible . https://en.wikipedia.org/wiki/Naked_short_selling

Possible but would require a licensed broker to break the law. It's like check kiting but with the aid of a broker the broker would have to credit your account shares that do not exist.

Re: Robinhood is facing nearly 50 lawsuits over GameStop frenzy

#43

Post by ceejayoz »

Railsify wrote: post #42
ceejayoz wrote: post #30

Earlier quoted context omitted.

It's definitely possible . https://en.wikipedia.org/wiki/Naked_short_selling

Possible but would require a licensed broker to break the law. It's like check kiting but with the aid of a broker the broker would have to credit your account shares that do not exist.

> In May 2012, lawyers acting for Goldman accidentally released an unredacted document revealing compromising internal discussions regarding naked short selling. "Fuck the compliance area – procedures, schmecedures", Rolling Stone Magazine quoted Peter Melz, the former president of Merrill Lynch Professional Clearing Corp. as saying in the document.

Re: Robinhood is facing nearly 50 lawsuits over GameStop frenzy

#44

Post by SkyBelow »

fractionalhare wrote: post #38
VoodooJuJu wrote: post #11

I'm pretty skeptical of the negative attention Robinhood is receiving. It seems like the entities who actually acted in bad faith, the ones who attempted illegal shorts, are trying to divert attention. Like someone else said, Robinhood is just the fall guy here.

Which firms attempted illegal short selling, and what is your specific evidence to support that they did?

Is this needed to make a claim?

If I say that someone stole the Declaration of Independence, then I would only need to provide evidence it was stolen, not evidence that shows some particular person stole it.

In this case, evidence of illegal shorts is what one would need to provide to back their claim, not evidence that a specific firm engaged in illegal shorts.

Re: Robinhood is facing nearly 50 lawsuits over GameStop frenzy

#46

Post by gruez »

ericmay wrote: post #34
VoodooJuJu wrote: post #11

I'm pretty skeptical of the negative attention Robinhood is receiving. It seems like the entities who actually acted in bad faith, the ones who attempted illegal shorts, are trying to divert attention. Like someone else said, Robinhood is just the fall guy here.

My issue isn’t the shorts, it’s when the shorts (or others) start messing with the game board. You should be able to short a stock, no doubt about it. But you shouldn’t be able to coordinate “short attacks” or use other tactics. I wonder if it may be a good idea to remove computers from trading except for execution enacted by humans because of human research. Should Bloomberg terminals be legal? Should everyone effec…

>But you shouldn’t be able to coordinate “short attacks” or use other tactics.

https://www.institutionalinvestor.com/article/b1qdq0y5b79rzb...

Re: Robinhood is facing nearly 50 lawsuits over GameStop frenzy

#47

Post by dangerbird2 »

fractionalhare wrote: post #37
BunsanSpace wrote: post #33

Earlier quoted context omitted.

Melvin capital and several other hedge funds engaged in naked short selling, and many backbone clearing houses enabled it via share counter fitting. (naked short selling is illegal) The deeper issue is the SEC not cracking down on the fail to delivers and naked short selling. I think Robinhood and other brokerages are the scape goats here. Their hands where tied when the companies that processed their orders refused…

> Melvin capital and several other hedge funds engaged in naked short selling, and many backbone clearing houses enabled it via share counter fitting. (naked short selling is illegal) No they didn't. Naked short selling is different from short selling while the short interest is high.

To clarify, People incorrectly assumed that because the short interest to float percentage was over 100%, the hedge funds had to be naked shorting. This is not true at all: because of how short selling works, there can be more than one short sale tied to a single share.

Seller A borrows a share, sells it to buyer B. Buyer B then leases the share to Seller C, who then short sells it. This is not a naked short, but a plain ol' short sale.

A naked short would be where Seller A doesn't own a share, but sells one to Buyer B anyway, with a contract stipulating the time the seller must buy and deliver the share. With the exception of market makers, this is illegal but ridiculously easy to detect, since Seller A's sales exceed the number of shares purchased. There is zero evidence any of the hedge funds were short selling.

Re: Robinhood is facing nearly 50 lawsuits over GameStop frenzy

#48

Post by gruez »

kmlx wrote: post #13
vga805 wrote: post #4

Earlier quoted context omitted.

Multiple brokerages shut down buying due to the collateral requirements that were raised. Robinhood seems like the fall guy here, hopefully people start asking the right questions about the collateral and the manipulation there.

other brokerages simply put up the money. this meant that while huge swaths of the retail investors in the US (and parts of Europe) were not allowed to buy GME, other retail investors had no issues. to top it off, certain brokerages only allowed sell orders. this meant a huge imbalance in the market. i really don’t get how this is legal and why heads aren’t rolling. case in point: saxo bank let me trade GME without a…

>other brokerages simply put up the money

...assuming they had the money. On the day they suspended trading, they also raised $2B in funding the same night. A few days later they partially unrestricted trading.

Re: Robinhood is facing nearly 50 lawsuits over GameStop frenzy

#49

Post by tedunangst »

bidirectional wrote: post #26
kmlx wrote: post #13

Earlier quoted context omitted.

other brokerages simply put up the money. this meant that while huge swaths of the retail investors in the US (and parts of Europe) were not allowed to buy GME, other retail investors had no issues. to top it off, certain brokerages only allowed sell orders. this meant a huge imbalance in the market. i really don’t get how this is legal and why heads aren’t rolling. case in point: saxo bank let me trade GME without a…

So what are you proposing? All brokerages must put up the collateral no matter what? Surely it is up to the individual businesses whether they can afford to, want to take the risk, etc.

Some people seem to be suggesting that when RH got the collateral call for funds they didn't have on hand, they should have instantly gone into receivership and wound the whole operation down, closing all accounts. Or something like that. They probably don't mean that, but it's the logical conclusion of what they're saying. Always have the required collateral or face instant annihilation.

Re: Robinhood is facing nearly 50 lawsuits over GameStop frenzy

#50

Post by gruez »

trestenhortz wrote: post #17
dmos62 wrote: post #14

Earlier quoted context omitted.

To answer my own question: quoting https://blog.bitmex.com/walkaway/ > "Brokers must post margin with the Depository Trust & Clearing Corporation and National Securities Clearing Corporation at the end of each day to ensure enough funds are reserved to cover any trading losses." > The “meme” stonks’ volatility skyrocketed, which meant that the clearing organisations could ask for more collateral from brokers on the g…

That’s not the reason robinhood gave at the time. Also, robinhood waited till the end of the day to lift its ban, despite other companies had followed robinhood lead lifting their bans hours earlier.

>despite other companies had followed robinhood lead lifting their bans hours earlier.

maybe because the other companies don't have a high concentration of wsb users?

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