A Florida investor is suing the online stock trading platform Robinhood after its services were interrupted for nearly the entire day March 2, causing users to miss a huge stock market rally.
Travis Taaffe of Sarasota County, Fla. claims he was relying on Robinhood and its failure caused him to miss out on substantial market gains. He filed for class-action status on behalf of all similarly affected users in U.S. District Court for the Middle District of Florida.
In addition to seeking class-action status, Taaffe requests damages, plus interest, and asks the court to require that “defendants’ systems are capable of handling its customers’ and/or users’ securities transactions even in a time of heavy trading volume, as well as requiring defendants to implement adequate redundancy or backup processes.”
On March 2, the Dow Jones Industrial Average rose over 1,294 points, the S&P 500 rose 136 points, and the Nasdaq rose 384 points in the biggest point gain in a single day in history.
Robinhood, which launched in 2015, offers a mobile app and website allowing users to invest in stocks, ETFs, and options through Robinhood Financial and crypto trading through Robinhood Crypto. The company has no storefront offices and charges no fees.
Robinhood reports about 10 million users and its main source of revenue comes from interest earned on customers’ cash balances and margin lending.
Shortly after the markets opened Monday, Robinhood experienced technical difficulties.
“Robinhood’s entire trading platform was completely inaccessible and unavailable to all of its customers and/or users,” the complaint said. “Customers and/or users were not even able to access their cash, securities and/or other property kept on the Robinhood platform, let alone use Robinhood’s services to buy, sell or trade securities.”
At one point during the day, Robinhood sent users an email: “This morning, starting at 9:33 AM ET, we started experiencing downtime across our platform. These issues are affecting functionality on Robinhood, including your ability to trade.”
It was not until 2:19 a.m. on March 3 that Robinhood announced on its Twitter account that, “Robinhood is currently back up and running. We’re testing through the night, and you may observe some downtime as we prepare for tomorrow,” the complaint said.
There were additional outages on March 3, Taaffe’s complaint alleged. That same day, in a blog post on Robinhood’s website, company co-CEOs Baiju Bhatt and Vlad Tenev addressed the outage.
“We now understand the cause of the outage was stress on our infrastructure—
which struggled with unprecedented load,” the post read. “That in turn led to a “thundering herd” effect—triggering a failure of our DNS system.
“Multiple factors contributed to the unprecedented load that ultimately led to the outages. The factors included, among others, highly volatile and historic market conditions; record volume; and record account sign-ups.”
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at firstname.lastname@example.org. Follow him on Twitter @INNJohnH.
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