Meme-Stock Probe Finds Robinhood Woes Were Worse Than It Let On

Bloomberg writes that the makers of the Robinhood app "faced a more dire situation during the height of last year's meme-stock frenzy than executives at the online brokerage let on publicly, according to a report from top Democrats on a key congressional committee." A more-than-yearlong investigation by staff on the House Financial Services Committee concluded Friday that the frenzied trading in GameStop Corp. and AMC Entertainment Holdings Inc. posed a significant threat to the online brokerage. Robinhood avoided defaulting on its regulatory collateral obligations in late January 2021 only because it received a waiver from its clearinghouse, according to the findings... "The company was only saved from defaulting on its daily collateral deposit requirement by a discretionary and unexplained waiver," according to the report. "Robinhood's risk-management processes did not work well to predict and avert the risk of default that materialized...."

The 138-page document released on Friday provides the most detailed look yet at how alarmed Robinhood executives grew over the situation in late January 2021. According to the findings, those actions didn't match the firm's public assertions.

Land of the Free, baby

[youngone]

And the story below this is " US Proposes New Rules to Curb 'Meme Stock' Rallies (yahoo.com) "
Of course they will, can't have poor people screwing over the investor class.

Re:Land of the Free, baby

[drinkypoo]

On one hand that's a tempting narrative, and not entirely incorrect. On the other hand markets are legitimately regulated to try to stop the general public from losing their shirts, because when that happens there are problematic knock-on effects. A percentage of the redditors who pumped Gamestop put in money they couldn't afford to lose, which yes is stupid, but still potentially causes actual problems for actual people other than them.

All that said, fuck the big guys who lost money right in their precious wallets, couldn't happen to a sadder slew of sacks. They turn the market into a game, they deserve to lose.

Re:

[brickhouse98]

That's a fair point but I think the bigger issue is the big fish never pay. You have fuckheads like Cramer who gloat about how they manipulate the market, Musk's obvious pump and dump schemes, etc. that never get their proper comeuppance. I think it's easy to see why people seethe at the gamestop BS that happened while the rich never get punished.

Re:

[thegarbz]

On the other hand markets are legitimately regulated to try to stop the general public from losing their shirts, because when that happens there are problematic knock-on effects. A percentage of the redditors who pumped Gamestop put in money they couldn't afford to lose, which yes is stupid, but still potentially causes actual problems for actual people other than them.

I think you're overestimating what was going on. It's actually not possible to lose more than your investment by simply buying stock which is what the overwhelming majority of redditors did. The question is more on where some of the more lunatic people managed to get lines of credit, but that line of credit could have been spent on anything. But this isn't what they are proposing to regulate here.

On the flip side, losing your shirt is precisely what the wall street investors were at risk of. When you place

Re:

[QuietLagoon]

{{{ -- " US Proposes New Rules to Curb 'Meme Stock' Rallies (yahoo.com) " Of course they will, can't have poor people screwing over the investor class. Flag as Inappropriate --}}} imo, it is OK to "screw over the investor class" but the company or companies you use to accomplish that goal need to be up front with their customers.

Re: Land of the Free, baby

[ToasterMonkey]

Of course they will, can't have poor people screwing over the investor class.

Holding or buying GME right now is definitely not some poor vs rich thing. GME is being traded like some dumbass crypto currency, and when it finally lands back on earth again, the "investor class" isn't going to be who's holding the bag.

Re:

[radarskiy]

The true mark is the one that thinks they are in on the con.

convenient timing

[Revek]

Lets face it. No one in the finance industry wants to punish anyone. After all they have all broke the law and don't want to be held accountable. They waited to release this on the day roe vs wade was overturned. The full read makes it obvious that they broke the law with the help of the DTCC and many others.

Re: convenient timing

[ToasterMonkey]

You're using some shitty Fisher-Price My First Stock Broker and acting like there's a huge conspiracy.

Get a different broker, grow up.

Robinhood Woes Were Worse Than It Let On

[QuietLagoon]

Ya think? But the real question to ask is: why? Is that what you want in a company you are providing business to?

Re:

[Anonymous Coward]

A tsunami starts with a swell. Momentarily too big to fail.

Re: Robinhood Woes Were Worse Than It Let On

[flyingfsck]

Not only Robin Hood. Other online brokers also melted under the pressure. I opened an account with Interactive Brokers and deposited money, then they closed my account and refused to return my money. I had to ask TD Bank to intervene and force them to return the funds.

Invest in Crypto, Expect to lose it

[bsdetector101]

Anyone putting $$$ into crypto now, should be FULLY aware of the dangers and also doing what happened in Robin Hood. It's been explained over and over, there is NO gov't protection. I played with $500 and fully expected that I might lose it all. I pulled out when I lost half and will never mess with it again. If someone is dumb enough to put their entire savings into it and lose it, don't cry it and expect to be bailed out !

Link to the House report

[Catvid-22]

Just in case you actual don't want to tl;dr, here's a link [house.gov] to the 138-page report. Or you can just read the most interesting part of the report, the 160+ character title: "Game Stopped: How the Meme Stock Market Event Exposed Troubling Business Practices, Inadequate Risk Management, and the Need for Regulatory and Legislative Reform." Now that's something for Twitter Notes.

Blame the SEC

[jsepeta]

Until the Securities Exchange Commission gets serious about prosecuting crimes committed by corporations, we shall continue to see market manipulation by those entrusted to be honest about how securities and stocks (insecurities?) are handled on the open market.
https://www.sec.gov/ [sec.gov]