Wednesday, February 24, 2021

Suing Robinhood – My Open Letter To The CEO

My open letter to Robinhood from the investment community

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Robinhood is in the spotlight again and now there are over 30 lawsuits against the Robinhood app. I asked you to send me questions for Vlad Tenev the CEO of Robinhood – if we as investors got a chance to speak to him. I received tens of thousands of submissions. Personally, I also have a lot of questions for Robinhood and I sincerely hope they listen and answer some of these questions from this video – because the tweet “Let the people trade” didn’t age well. So following what happened, I’ve stopped talking about giving away free stocks and I’m not receiving any money from Robinhood in the form of affiliates / commissions and every capacity until we figure out exactly what happened.

Here are some of the most important questions our community would like Robinhood to answer.

1. Was there a liquidity issue? Liquidity is the availability of stocks, were there factors we should be aware of?

2. How are financial requirements calculated by the NSCC? I know it’s proprietary and subjective but why was the initial quote so high? $3 billion, and how was it negotiated down to $1.4 billion and subsequently $700 million? How does the NSCC calculate such a thing and make it so prohibitively expensive without literally hopping into a time machine and knowing how much volatility there would be that day? It doesn’t make sense.

3. Why couldn’t Robinhood continue to allow people to buy stocks like Gamestop or AMC – that were using cash accounts? I have over $20k in my cash management part of the app and I was not able to buy any of the heavily shorted stocks.

4. Why wouldn’t either the NSCC or the SEC make it fair for everyone by shutting down trading both on the buy and sell side, both on the retail and institutional side – across the board? Why did the hedge funds get to keep their momentum but the retail buy side was shut down? If we’re going to “protect people” then protect everyone equally.

5. What is Robinhood’s full relationship to companies like Melvin Capital, Citron Research and Citadel? Can you disclose how much of Robinhood’s income is thanks to market makers like Citadel? From what we understand, Citadel is Robinhood’s largest client.

6. If this happens again in the future and the clearing house quotes Robinhood a lot of money (like the $3 billion dollars we recently saw) how will Robinhood handle this differently? If it wouldn’t be handled differently, clearly that would be the wrong answer as thousands of customers are upset at what happened.

7. How does the company plan to restore consumer confidence in Robinhood? Robinhood is no longer the only and best app for making free trades, we also have WeBull, M1 Finance, TD, Charles Schwab, etc. and in some cases they have more features. Some of our suggestions: enable UK trading as promised in Q1 of 2020, cryptocurrency buying across all the states, cryptocurrency transfers off brokerage, IRA / Retirement Accounts, and most importantly a customer service support line.

8. Is it possible to open up better channels of communication with some regulatory body that can step in and stop trades for everyone equally? That way Robinhood doesn’t have to make the difficult choice of restricting people by itself.

9. Will Robinhood do anything in the future to minimize its dependence on companies with huge conflicts of interest? If not, would Robinhood be willing to acknowledge that it’s a dated system that needs change/updating?

On behalf of my channel I would love if it Robinhood and its CEO Vlad Tenev would be kind enough to address this on my channel or through their networks. As investors, and as users of the Robinhood app, some clarification on these points would go a long way.

Personal disclosure: I have stopped promoting Robinhood’s free stock giveaways and I’ve stopped receiving any commissions until this issue is cleared up. To this day, I’ve never taken a paid sponsorship from any company (despite being offered a lot of money to do so).

*None of this is meant to be construed as investment advice, it’s for entertainment purposes only. Links above include affiliate commission or referrals. I’m part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.

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