A class-action lawsuit was recently filed against Robinhood, which supports stock and crypto trading, and the platform has been accused of manipulating the market.
Investors in about nine companies have filed a lawsuit against the platform, which had been involved in the frenzy seen in meme stocks last year in January.
A report on Thursday disclosed that the US District Court Judge Cecilia Altonaga, hailing from the Southern District of Florida, had given the green light to investors in different companies to file the lawsuit.
These included names like AMC and GameStop and they were able to file the lawsuit that accuses Robinhood of generating fake supply figures of meme stocks.
Last year in January, memecoins like Dogecoin had seen their prices rise to all-time highs. This was after a subreddit group called r/Wallstreetbets had seen some crypto and stocks generate a greater amount of interest.
Once the value of these stocks had begun to go up, Robinhood had chosen to suspend the purchase of these stocks and assets.
This included GME stocks, which had begun to record massive gains. Due to the increase in prices of these stocks, large hedge funds operating on Wall Street and retail investors had developed a rift.
It was because the former had been shorting these stocks.
Due to the increase in activity associated with these stocks, the Robinhood app had received one-star reviews from its users on the Google Play Store.
It also pushed the exchange to halt its plans of conducting an initial public offering (IPO) in the United States.
The company also saw a number of class-action lawsuits filed against it, which claimed that the company was working in favor of the hedge funds, given the relationships it had had with Melvin Capita and Citadel.
A number of US lawmakers had also begun looking into the platform because of the meme stock controversy in the previous year.
In February last year, Vlad Tenev, the chief executive of Robinhood, appeared before a House Financial Services Committee to testify.
The New York Department of Financial Services announced on 2nd August that a penalty of $30 million had been imposed on Robinhood because it was not in compliance with the Anti-Money Laundering/Bank Secrecy Act obligations.
If these legal problems were not enough for the company, it has also been suffering from financial troubles brought about by the downturn in the crypto market.
During its release of the second quarter results for the year, the CEO also said that the exchange was going to lay off about 23% of its workforce.
Tenev said that they had reduced their staff by 9% back in April, but this did not have a significant impact on the platform.
The shares of the company had also dropped in the year, but have been making a recovery. The last month saw its share price go up by 26%.
But, these legal troubles are likely to take a toll on its recovering share price.