Controversial Robinhood App Subject of Recent Cybersecurity Breach
As recently reported by Bloomberg, during the week of October 5, 2020, approximately 2,000 customers of the Robinhood investing and trading app had their online accounts looted after being compromised by hackers. Impacted investors informed Bloomberg that their accounts were hacked despite having already set up certain account protection features. While a Robinhood spokesperson had initially indicated that only a “limited number of customers” were impacted by the data breach, Robinhood later upwardly revised its estimate to nearly 2,000 impacted accounts.
As reported, one angry customer indicated that “My Robinhood account was also hacked. I received a bunch of notifications that all my stocks were sold. Shortly thereafter, I received another notification that $--- was withdrawn by a company (I don’t recall the name except for the last part of it was ‘digital’) . . . . ” Disgruntled customers have vented their frustration online through Twitter and Reddit, alleging that Robinhood’s response has been woefully inadequate. In some cases, impacted customers were no longer able to access their account while awaiting resolution from Robinhood customer support.
To be sure, Robinhood is not the first online brokerage platform to fall victim to a targeted cyberattack. In 2006, hackers were able to access certain E*TRADE accounts and place buy orders on certain penny stocks that they held, thus leaving aggrieved investors holding the bag by purchasing penny stocks for far more than their actual value. This breach ultimately led to several new account protection protocols for financial services websites, including strong encryption measures and firewalls.
While online investing and day-trading activity has experienced dramatic growth during the Covid-19 pandemic, Robinhood’s platform has experienced various technical glitches. In March 2020, for example, the Robinhood app reportedly crashed on several occasions, leaving investors unable to execute orders. Glitches aside, critics of the Robinhood business model have suggested that the company has done a disservice to inexperienced investors by turning the serious business of investing into something of a game, or even a form of gambling, through such features as bursts of confetti on a customer’s screen to celebrate an executed trade.
In fact, some financial services industry insiders have voiced concern that Robinhood has created a trading app which features some very risky investments, including bitcoin and certain thinly capitalized and speculative penny stocks. In addition, novice investors using the Robinhood app might naively stumble into trading on margin, or purchasing securities using borrowed funds, thereby exposing themselves to outsized losses in a rapidly depreciating market. Even more troubling, the Robinhood app offers users the ability to trade options contracts, which for many unsophisticated investors are too complex to fully grasp.
The attorneys at Giarrusso Law Group LLC have considerable experience in bringing claims on behalf of investors who have been victimized by the negligence or wrongdoing of a financial advisor or brokerage firm. Investors may pursue a claim to recover losses through securities arbitration before the Financial Industry Regulatory Authority (FINRA), or in some instances, through litigation. Investors who wish to discuss a possible claim may contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost, confidential consultation.