Jose Batista, a private investor, received nearly $30,000 from Robinhood after he filed a complaint with the arbitration service of the Financial Industry Regulatory Authority (or FINRA). His case could ultimately set an example for other retailers who are still angry about the trading platform’s actions in January 2021.
On January 28, Batista planned to sell his shares in Koss and Express – but Robinhood had imposed trading restrictions on them, limiting the number of shares the users could buy. This meant Batista had to watch helplessly as the prices of his shares fell to nearly half of what they were the day before the restrictions were put in place, according to Market overview. “When I saw it fall and plummet, I felt terrible, and then I felt stuck,” Batista said Motherboard.
Robinhood’s restrictions were due to the rush of trades surrounding GameStop’s stock, which was driven in part by retail investors. In January 2021, the company was hyped by users of the WallStreetBets subreddit, and the stock rose in value. This eventually led to temporary market-wide trading halts and even caused apparent technical difficulties at several brokers. That included Robinhood, which not only restricted trading in GameStop, but also other stocks such as AMC, Blackberry, Koss and Express.
The trading restrictions meant that Robinhood users could not buy shares of the major meme stocks. It also severely limited the number of shares its users could buy in other companies – at one point, users could only buy shares of Express if they already owned less than five. Before Koss, you were only allowed to buy one share. The freeze drew dozens of user lawsuits, review bombs, and even the attention of lawmakers. However, most other lawsuits and investigations have gone nowhere, according to Market overview and Batista’s lawyer.
The arbiter gives no reason for Batista’s victory. However, Batista’s lawyer wrote a post in which he theorized why they were successful where others had failed: Because the case focused on “Robinhood’s inadequate liquidity management practices and counterparty risk monitoring.” The post also says they have “attacked the idea that Robinhood’s customer agreement gives the unfettered right to restrict trading for any reason, at any time.”
For other traders, the case could represent blood in the water. While arbitration decisions don’t set a legal precedent, meaning a different arbitrator in a nearly identical case could rule differently, Batista’s attorney is urging other Robinhood clients to contact the company. A few threads on stock-related subreddits have already pointed to the possibility that the case could be used as an example to try and get a payout from Robinhood.
In addition to the $29,460.77 in damages Batista will receive, Robinhood will also receive several thousand dollars: The arbitrator has ordered it to pay interest on the money for nearly a year. Robinhood will also have to pay filing fees and some other fees.
Robinhood, the parent company of the two entities named in the dispute, declined to provide an official response to this story. Those two entities are Robinhood Securities and Robinhood Financial. Both are members of FINRA, although the parent company is not – so the ruling applies to those two legal entities within Robinhood itself.
While GameStop’s stock led to the trading restrictions, this is not what Batista was complaining about. Batista did owned GameStop stock at the time, but had no plans to sell them, according to Market overview. Some Redditors have urged him to put his profits back into GameStop, but he plans to invest the money in his trucking business and use it to pay for childcare, according to Motherboard.
To Batista, it seems like a happy ending to the saga — perhaps his story will be adapted as part of one of the bajillion movies, documentaries, and TV shows supposedly in the works about the GameStop/WallStreetBets bonanza.