New York Attorney General Letitia James’s office is “actively reviewing” activity related to the Robinhood application and the trading of GameStop stock.
Robinhood, was founded in 2013 by Vladimir Tenev and Baidu Bhatt. The financial services company says it’s out to “democratize finance,” and offers commission-free trading on individual companies, options, and ETFs. In addition, the company also offers cash management accounts and cryptocurrency trading.
However, the app has found itself at the center of controversy in recent days after members of a Reddit group called WallStreetBets, a speculative investing discussion forum, took aim at hedge funds making big bets against certain companies.
Members of the group subsequently banded together to drive up shares of retailer, GameStop, as well as a handful of other stocks including Nokia, cinema chain AMC, and BlackBerry.
The move caused uproar on Wall Street and saw GameStop’s value hit $30 billion at one point—more than 100 times what it was worth in August—leaving a number of Wall Street institutions, including hedge fund Melvin Capital, incurring billions of dollars in losses.
On Thursday, Robinhood subsequently began restricting trades of GameStop, AMC Entertainment Holdings, American Airlines, BlackBerry Ltd., Bed Bath & Beyond Inc., Express Inc., Koss Corp., Naked Brand Group, Nokia Corp, Trivago, and Tootsie Roll Industries, Inc. due to what it called the “recent volatility.”
The plaintiff says these actions “deprived retail investors of the ability to invest in the open-market and manipulating the open-market.”
Later in the day, Robinhood stated it will start allowing “limited buys” of GME and the other stocks starting Jan. 29.
The uproar has also attracted the attention of various members of Congress, including Rep. Alexandria Ocasio-Cortez (D-N.Y.), who on Thursday called for an investigation.
Sen. Ted Cruz (R-Texas) also tweeted that he was in agreement with Ocasio-Cortez.
“It’s a good reminder, though, that the stock market isn’t the only measure of the health of our economy,” Psaki said.