Morgan & Morgan’s Business Trial Group and its securities attorneys are investigating brokerage and clearing firms that recently prohibited investors from selling their shares of GameStop, AMC, Nokia, Blackberry, Bed Bath & Beyond, and Trivago.
The share prices of these companies had soared recently after users on the WallStreetBets page of chat forum Reddit took aim at hedge funds that were making enormous bets that the share prices would fall. As investors continued to pile their money into shares of companies like GameStop, the share price surged. GameStop’s share price, for example, is worth more than 100 times what it was worth in August. This left hedge funds that had shorted the stock with billions of dollars in losses.
But on January 28, several brokerage and clearing firms such as Robinhood, Interactive Brokers, TD Ameritrade, Apex Holdings, Public, WeBull, and others took the extraordinary step of prohibiting investors from buying the stock of companies whose prices had soared on the momentum of Reddit investor trading. The share prices of these companies crashed, with GameStop shares plunging 44% by the end of the day.
The New York Times has reported that Robinhood was forced to find emergency cash on January 28, drawing on a more than $500 million credit line and taking an emergency infusion of over $1 billion from investors, after the Depository Trust & Clearing Corporation abruptly raised margin-cushion requirements due, in large part, to the speculative trading in GameStop and other stocks. By prohibiting its customers from trading GameStop and other securities, Robinhood reduced its risk level and helped it meet requirements for additional cash.
Robinhood is an app that claims to democratize finance by letting ordinary people trade shares and options. Many Robinhood users felt betrayed by the company’s ban and have questioned Robinhood’s justification for implementing it based on risk-management concerns. The SEC said on January 29 that it would closely review any conduct that hurt investors or inhibited their ability to trade certain stocks.
Some brokerage firms, such as Fidelity, also prohibited customers from selling their shares of various companies (including GameStop, AMC, and Nokia) on January 28. If you tried to sell your shares but were prohibited from doing so, you may be entitled to compensation. The securities attorneys at Morgan & Morgan’s Business Trial Group are here to help. Please contact us at (888) 744-0142 for a free consultation.
The Business Trial Group at Morgan & Morgan helps investors recover their losses on a contingency basis. We are only paid if we successfully recover money for you. We have helped investors recover tens of millions of dollars of investment losses.
The Business Trial Group is part of the largest contingency law firm in the nation, with 700 lawyers and 50 offices.
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