The firm’s shareholders, nonetheless, caught with it. Within a week, it raised two rounds of emergency funding totaling $four.four billion to satisfy lending necessities for inventory trades and to proceed making trades. That funding resulted in Robinhood’s outsize loss within the first three months of the 12 months.
Robinhood attracted scrutiny from regulators lengthy earlier than the GameStop frenzy drew the nationwide highlight. In 2018, it introduced that it will supply checking and financial savings accounts, claiming it was already backed by the Securities Investor Protection Corporation, a shopper safety group that oversees brokerages. After the group mentioned it didn’t insure checking and financial savings accounts, Robinhood backtracked and began the service a 12 months later.
Last 12 months, Robinhood was fined $65 million by the Securities and Exchange Commission over costs that it misled clients about the way it makes cash. And in latest months, Massachusetts has escalated a combat in opposition to the app, transferring to revoke its license within the state, echoing different complaints that its app entices inexperienced buyers to make dangerous bets.
The firm additionally skilled outages at key moments, together with in March final 12 months, when the pandemic hit and shares went into a free fall.
In its prospectus, Robinhood outlined regulatory scrutiny as a danger issue. It mentioned it anticipated to be topic to investigations, actions and settlements sooner or later “given the highly regulated nature of the industries in which we operate.”
Robinhood additionally highlighted class-action lawsuits associated to outages, securities fraud, hacking and the buying and selling halt this 12 months. The firm settled a lawsuit by the household of Alex Kearns, a buyer who died by suicide final 12 months after making dangerous trades on Robinhood’s app.
“This is a company that is flying superfast in a really regulated environment,” Mr. Haslett mentioned.
Another danger, Robinhood mentioned, was a decline within the demand for Dogecoin, a joke cryptocurrency primarily based on a meme about a Shiba Inu canine. One-third of the income from cryptocurrency buying and selling within the first three months of the 12 months got here from Dogecoin, the corporate mentioned.