Robinhood faces more legal troubles as a judge has refused to throw out a lawsuit alleging customers lost money during outages in March 2020, Bloomberg reported Thursday (Feb. 18).
U.S. District Judge James Donato said the case had merits to go forward and that the customers had a concrete enough allegation. However, he pushed the lawyers for the two sides to reach an agreement.
“This is an unusual case in the sense that, as the plaintiffs have acknowledged, Robinhood has pretty much said this is a problem,” Donato said. “There was ownership and apology, and that’s 80% of the battle in most cases.”
Donato said the parties should find a mediator to help start negotiations to save money and time, Bloomberg reported.
The outage in March 2020 wasn’t the only one Robinhood faced, and PYMNTS said that it showed the weaknesses of Robinhood as a business model. Online trading isn’t new, and trading is a commodity in which trust is necessary.
The company responded at the time that it was working on improving the customer experience — although, at the time of the PYMNTS’ report, the company’s email service was still not functional.
With its outages, along with spotty email communications, PYMNTS said that Robinhood was on thin ice, particularly with millennials and younger users, with the lack of transparency.
Another outage occurred in June, which the company noted had led to “degraded performance on trades and transfers.”
At the beginning of the pandemic last year, the company was at the heart of an exceptionally high day trading sequence. Investors at the time were still stuck inside because of the social distancing and lockdown requirements and, as such, had more time to use the app. Days of elevated trading have long been vulnerable to such shutdowns on the app.
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