Robinhood, the commission-free stock-trading app, suffered a service outage earlier this week that left customers furious. However, experts believe users’ threats to take legal action will be difficult to follow up.
The company blamed the downtime to a system overload caused by “highly volatile and historic market conditions, record volume and record account sign-ups.”
The FinTech unicorn’s problems lasted for two days during which customers claimed they lost thousands of dollars.
Several of them threatened to take legal action, either by turning to the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Agency or the Financial Regulatory Authority (FINRA). Others threatened to launch a class-action lawsuit against Robinhood.
There was even a Twitter account started named Robinhood Class Action that has amassed close to 6,700 followers at the time of writing.
But it seems like these threats may be difficult to follow up on. According to a FINRA spokesperson speaking with Business Insider, investors are usually unable to bundle complaints together and file a joint class-action lawsuit.
The non-governmental body’s rules do stipulate that, in some narrow circumstances, there is room for joint complaints stemming from shared transactions. In other words, it is unlikely, according to the experts, to launch a joint suit against Robinhood.
This was something that Robinhood Class Action also acknowledged on Wednesday when it tweeted, “Most lawyers I have spoken to are only after individual cases with projected losses of $50,000. They will assists in [FINRA] arbitration and likely get you a settlement in [12 to 18] months. Not ideal but this is ultimately the reality.”
Understandably, users who had not lost that much money were less than satisfied by the statement. “Wow that’s unfortunate a lot of us lost money below 10k but it’s still a lot for accounts like us,” one tweeted.
Another said, “Just another example of how they try and keep us little people down. Not everyone is a trust fund baby with 50k to put into a [POS] trading platform. Most people with that much money are and have been on [TD Ameritrade,] [E*TRADE,] [Charles Schwab Corp] or any other platform.”
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