Illustration by Alex Castro / The Verge
Jose Batista, a retail investor, was awarded almost $30,000 from Robinhood after filing a complaint using the Financial Industry Regulatory Authorityâs (or FINRAâs) arbitration service. His case may end up being an example for other retail traders who are still upset at the trading platformâs actions in January of 2021.
On January 28th, Batista was planning on selling his stock in Koss and Express â but Robinhood had placed trading restrictions on them, limiting the amount of shares its users could buy. This meant that Batista had to watch helplessly as the prices of his stock fell to nearly half of what they were the day before the restrictions were put in place, according to MarketWatch. âSeeing it plummeting and plummeting, I felt horrible, and then I felt stuck,â Batista told Motherboard.
Robinhoodâs restrictions were thanks to the rush of trades happening around GameStopâs stock, which were in part driven by retail investors. In January 2021, the company was hyped up by users of the WallStreetBets subreddit, and its stock rocketed up in value. This eventually lead to temporary market-wide trading halts and even seemingly caused technical difficulties at several brokerages. That included Robinhood, which restricted trades on not just GameStop but other stocks such as AMC, Blackberry, Koss, and Express.
The trading restrictions meant Robinhood users couldnât buy any shares of the main meme stocks. It also heavily limited the number of shares its users could buy in other companies â at one point, users could only buy shares of Express if they owned less than five already. For Koss, you were only allowed to buy a single share. The freeze attracted dozens of user lawsuits, review bombs, and even attention from lawmakers. Most of the other lawsuits and investigations havenât ended up going anywhere, though, according to MarketWatch and Batistaâs lawyer.
The arbitrator doesnât give a rationale for Batistaâs win. However, Batistaâs lawyer wrote a post theorizing about why they were successful where others had failed: because the case focused on âRobinhoodâs inadequate liquidity management practices and monitoring of its counterparty risk.â The post also says that they âattacked, head-on, the notion that Robinhoodâs customer agreement gives it unfettered right to restrict trading for any reason, at any time.â
To other traders, the case could represent blood in the water. While arbitration decisions donât set legal precedent, meaning that another arbitrator could rule a different way in an almost identical case, Batistaâs lawyer calls for other Robinhood customers to contact the firm. A few threads on stock-related subreddits have already pointed out 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 be on the hook for a few more grand: the arbitrator ordered it to pay almost a yearâs interest on the money. Robinhood will also have to pay filing and some other fees.
Robinhood, the parent company of the two entities named in the dispute, declined to provide an on-the-record response for this story. Those two entities are Robinhood Securities and Robinhood Financial. Both are members of FINRA, though the parent company is not â so the ruling applies to those two legal entities within Robinhood itself.
While GameStopâs stock led to the trade restrictions, itâs not what Batista filed his complaint about. Batista did own GameStop shares at the time but had no plans of selling them, according to MarketWatch. Some Redditors have urged him to put his winnings back into GameStop, but he instead plans on investing the money into his trucking business and using it to pay for childcare, according to Motherboard.
For Batista, it seems like a happy end to the saga â maybe his story will be adapted as part of one of the bajillion movies, documentaries, and TV shows that are supposedly in the works about the GameStop / WallStreetBets bonanza.