Robinhood will pay $9.9 million to a group of clients who sued an online broker for persistent implementation errors. Plaintiffs estimated their damages at $20.4 million.

Stock trading app Robinhood has agreed to pay $9.9 million in cash to a proposed class of users who are suing for repeated service disruptions. https://t.co/Wqunrr9Vgl

— Law360 (@Law360) August 9, 2022

The class action lawsuit was filed by 150,000 platform users.

The parties agreed on a pre-trial agreement.

“Agree […] provides tangible and immediate compensation for such processes”, it says in the statement.

The allegations against Robinhood are related to the March 2, 2020 incident. On that day, the exchange showed the highest gain in history at that time, but the platform did not work properly until the next trading session.

Another similar fault was recorded on March 9, 2020.

By mid-year, multiple lawsuits against Robinhood were consolidated in one California federal court.

The proposed compromise identifies three situations that can be included in the transaction. Payments will be distributed to users:

• Closed at least one position at a loss on March 3 compared to the average price during the crashes on March 2 and 3;
• Incurring a loss in a certain type of option position that expires on March 2;
• loss due to non-executed transactions.

Robinhood Deputy General Counsel Cheryl Crumpton said she is pleased that the online broker has reached an agreement. The company representative recalled that since the beginning of 2020, it has invested heavily in the development of the platform.

Recall that in December 2020, Robinhood’s marketing activity caught the attention of the Massachusetts Commonwealth Secretariat’s Department of Securities. They said the platform exposes customers to “unnecessary trading risks” and “doesn’t meet reliable standards”.

same month SEC earned $65 million from Robinhood for misleading users by claiming that the service does not charge trading fees.

In July 2021, the online broker committed to paying a $70 million fine to settle a dispute with the US Financial Industry Oversight Office.

In October of the same year, Robinhood added 24/7 customer support by phone.

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