Investors are using this app to automatically join the Robinhood class-action lawsuit amid GameStop chaos
Thousands of investors are using a consumer-focused online service called DoNotPay.com to automatically join a class-action lawsuit against trading platform Robinhood.
The lawsuit was filed Thursday in the Southern District of New York after Robinhood temporarily restricted GameStop trading on its platform. That enraged many small investors who were trying to get in on the GameStop trading frenzy of the past few days.
Following Robinhood's decision, the stock's price dropped. The suit alleges "Robinhood's actions were done purposefully and knowingly to manipulate the market for the benefit of people and financial institutions who were not Robinhood's customers."
Under normal circumstances, DoNotPay helps streamline confusing processes to help consumers get refunds and cancel subscriptions, among other services. But DoNotPay CEO Joshua Browder added the ability to join the Robinhood class-action lawsuit Thursday after receiving hundreds of messages from enraged users, he tells CNBC Make It.
"Robinhood is not acting in the consumer's best interest," Browder says. "A lot of users who sign up aren't the most sophisticated investors. They feel betrayed by a platform that has the literal name Robinhood."
Robinhood declined to comment on the lawsuit or DoNotPay.
By Friday afternoon, around 26,000 people had joined the class action, 4,000 had filed complaints with the Securities and Exchange Commission (SEC) and 400 had entered arbitration via DoNotPay, according to Browder, who says he does not have a financial stake in GameStop stock.
To join the suit, users need to detail their losses, including when their trades were halted. The information is then forwarded to the law firm representing the class action.
It is not not clear if the suit will be successful. Robinhood's terms of service give the company the right to block, cancel and restrict transactions, and even delete user accounts. It also includes an arbitration clause.
But Browder is optimistic, pointing to the recent settlements in a class-action lawsuit against Chime Bank as precedent. He says the terms of service don't necessarily apply to what Robinhood did.
DoNotPay charges a $36 annual fee for its service. "Some people might disagree with that, but we don't want to have the same business model as Robinhood," he says, which pioneered commission-free trades. "If you don't pay for the product, you are the product."
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