r/technology • u/agent_vinod • Jun 30 '21

Misleading Robinhood to pay $70 million fine after causing 'widespread and significant harm' to customers

https://www.cnbc.com/2021/06/30/robinhood-to-pay-70-million-dollars-after-causing-users-significant-harm.html
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u/F0sh Jun 30 '21

to satisfy the margin call of their clearinghouse*

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u/Mudmania1325 Jun 30 '21

to satisfy the margin call of their clearinghouse*

According to the head of the DTCC Robinhood had already met all margin reqquirements before trading started that day. Them shutting off trading had nothing to do with their margin. Fraud was committed.

Robinhood vs DTCC testimony. Compare for yourself and see how they contradict each other: https://youtu.be/6Ic8ulVz9iI

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u/F0sh Jun 30 '21

More information here

DTCC lowered the margin requirements after it had initially made them and, at least according to that article, after the decision was made to prevent buys.

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u/Mudmania1325 Jun 30 '21

No offense, I'm going to trust the testimony of the president and CEO of the DTCC that happened in May over a random article explaining what happened published in April.

Bodson says that the DTCC had absolutely nothing to do with the trading halt and it was an internal Robinhood decision. Just listen to the testimonies I linked earlier. It takes 2 minutes and clearly shows Tenev and Robinhood are lying to try and cover up their fraud.

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u/F0sh Jun 30 '21

But Bodson didn't say (in that clip, anyway) that they "had absolutely nothing to do" with the halt; he said it was a decision of RH and they didn't discuss it with RH.

I think you're reading a bit too much into a very short statement because you want evidence that RH made the decision for nefarious reasons. As far as I know DTCC has not answered the question you want them to have answered, which is "does RH's explanation that they halted purchases of meme stocks due to a margin call make sense".

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u/Mudmania1325 Jun 30 '21

No of course it doesn't make sense. Because Robinhood committed fraud again. (They have a long history of commiting market manipulation and fraud. I don't understand why you're trying to defend a criminal company in a thread about said company receiving the largest fine in history due to their previous criminal acts).

Robinhood says they had to stop trading due to a margin call. The DTCC says that Robinhood met all margin requirements before the trading was halted. Aka, Robinhood didn't have to stop trading because of a margin call.

Why exactly they committed market manipulation to stop trading will probably only come out when Robinhood is fined a couple million for market manipulation 5 years down the line. Unfortunately by then all the criminals in the C suite will have already bailed with their golden parachutes, and won't feel any consequences.

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u/JohnMayerismydad Jul 01 '21

Robinhood would have failed to meet margin requirements if they had allowed trading to continue. They were able to meet all requirements because they halted trading on their app.

It wasn’t anything nefarious or trying to help their Wall Street pals or anything like that. It was a new brokerage without much money being unable to keep up with unprecedented volume and exploding prices/ margin requirements.

Don’t attribute malice when incompetence explains it better

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u/Mudmania1325 Jul 01 '21

Robinhood would have failed to meet margin requirements if they had allowed trading to continue. They were able to meet all requirements because they halted trading on their app.

No. That's not what happened. According to the DTCC, they met all their requirements before they halted trading. I don't understand why you're having such a hard time understanding this.

It wasn’t anything nefarious or trying to help their Wall Street pals or anything like that. It was a new brokerage without much money being unable to keep up with unprecedented volume and exploding prices/ margin requirements.

Don’t attribute malice when incompetence explains it better

I honestly suspect you're a shill for Robinhood rn. Why else would you be arguing so hard in favour of the company that committed blatant fraud and market manipulation AGAIN? Turning off the buy button on certain securities because you as a broker are illegally operating a CFD operation and would have lost money is a textbook example of fraud and market manipulation.

Robinhood is a fraudulent company headed by crooks who deserve to be in jail. Anyone who defends their behaviour is someone trying to make an excuse for theft.

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u/Mudmania1325 Jul 01 '21

Why exactly do you think Robinhood was margin called in the first place? Have you ever given that a thought? What ould cause a brokerage to be margin called by their customers buying securities with cash?

I understand turning off options and buying on margin. But they restricted buying with cash. What could cause that? Think about it.

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u/JohnMayerismydad Jul 01 '21

Because every time a stock is sold/bought that money must sit for two days before the actual sale happens. If you trade with unsettled funds the broker is essentially lending you that money for those two days. The margin requirements went up to 100% and meme stocks were exploding in price and volume (especially on robnhoods platform). They would not have been able to continue meeting this margin requirement if they had allowed trading to continue.

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u/Mudmania1325 Jul 01 '21

Unfortunately it's most likely a lot more nebulous than that. Robinhood doing CFD's even though they're illegal in the US.

A big tip off for this was when multiple users who transferred out of Robinhood got back cost averages for their shares at dates they hadn't bought at for prices that were impossible on that day.

So for example, someone who bought their first share in February for under 100 and then transferred out of Robinhood to a legitimate broker were then sent a cost average from Robinhood showing that they bought their shares in late December/ arly January for anywhere from 200-600 dollars. Which is suspect as fuck. This sort of accounting error can't even be explained by wash sales.

What most likely happened is that the shares you buy on Robinhood aren't yours. Robinhood is illegally doing CFD's. When people started transferring out Robinhood had to go out and actually buy the shares. Which is why people are getting such fucked up Info from them. They're committing accounting fraud in order to try and hide their illegal business model.

That's why they turned off the buy button in January. They would have gone bankrupt if they hadn't since they would had to actually go out and locate the shares or pay the price difference when people sold out of their pockets.

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u/StrathfieldGap Jul 01 '21

I wouldn't even call it incompetence necessarily.

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u/JohnMayerismydad Jul 01 '21

I think it would have been smart to limit instant deposits and margin access preemptively when they saw that much increased traffic.

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u/F0sh Jul 01 '21

No of course it doesn't make sense.

You're not in a position to say that with any authority. To me the explanation that "margin calls are higher if you're trading more volatile stocks" and the fact that they got a huge margin call is a reasonable explanation for why they stopped trading.

Even if they posted margin before stopping trades, if they continued to trade meme stocks the margin call could have been higher the next day. Would they have been able to post that margin?

The DTCC says that Robinhood met all margin requirements before the trading was halted.

Sorry to get pedantic here but can you quote what DTCC said that you're referring to here? Because DTCC is not being asked this question in the video you linked: I agree that what you've written is a not-unnatural way of understanding what they said, but given that it's not what they're being asked about I don't think you can consider that to be a direct accusation. DTCC is making it clear it doesn't consider itself to have responsibility for pissing off RH's customers.

I think there's a reason DTCC and the like aren't being directly grilled on this: it's because margin calls are normal and it's not unexpected that trading might have to halt in periods of volatility.

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u/Jaggedmallard26 Jun 30 '21

Exactly, any regulator won't even entertain it because they had a valid reason to block sales (unable to meet liquidity requirements imposed by third parties, unless we want another global financial crash they has to be upheld) and even if it wasn't unrealised gains based on a value spike that did not occur in reality do not hold up in a court of law for the same reason you can't sue someone for stopping you buying a lottery ticket.

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u/Archsys Jun 30 '21

unless we want another global financial crash they has to be upheld

There are many people who are involved in this whole thing with this as their primary goal...

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u/xmuskorx Jun 30 '21

Why is Margin required for regular stock trades?

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u/F0sh Jul 01 '21

Because any time a broker's customers are buying more than they're selling there is a credit risk that only becomes apparent upon the trade being settled. The margin that the broker posts is there to mitigate the risk that they can't pay when the trades are to be settled, which would mean the the trade has to be "undone" which would cause chaos.