Robinhood Sued Over Issues Tied to 'Dark Pool' of Payments
The trading platform is accused of “material omissions, misrepresentations, and concealment” of payments for order flow deals.
Robinhood’s legal woes continue. The most recent allegations, filed by a disgruntled client on behalf of himself and others who use the mobile app and online trading platform, allege that the firm breached its fiduciary duty to clients.
In a class action complaint filed in U.S. District Court for the Northern District of California Jan. 15, Robinhood is accused of “material omissions, misrepresentations, and concealment” of its “dark pool” of payments for order flow arrangements.
The “inferior execution prices they caused was a breach of Robinhood’s fiduciary duty” to the plaintiff, Edward Luparello of Santa Barbara, California, and others who use its platform, the complaint alleges.
Through its actions, Robinhood violated the Securities Exchange Act of 1934, as well as California’s Corporations Code, Consumer Legal Remedies Act, Civil Code and Unfair Competition Law, the complaint alleges.
The plaintiff seeks unspecified damages and restitution on behalf of himself and the class. Robinhood declined to comment on the complaint Friday.
Similar allegations have been made against Robinhood in recent months.
Earlier Legal Matters
In December, the Securities and Exchange Commission said Robinhood agreed to pay a $65 million civil penalty to settle allegations that it repeatedly failed to disclose its receipt of payments from trading firms for routing client orders to them, and also failing to satisfy its duty to seek the best reasonably available terms to execute customer orders.
This settlement came one day after William F. Galvin, Massachusetts’ top securities regulator, accused Robinhood of violating state law by using overly “aggressive tactics to attract new, often inexperienced, investors” and “gamification to encourage and entice continuous and repetitive use” of its mobile application.
Earlier this month, another complaint seeking class action status was filed against Robinhood by Siddharth Mehta, a client of the company who allegedly “lost tens of thousands of dollars” after the company’s platform was breached by a hacker as a result of what the plaintiff said was Robinhood’s negligence.