What's Next For Robinhood Following Outages?

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Robinhood has seen three outages in two weeks.

On Monday, March 2, the app went down due to what the company said was “stress on our infrastructure – which struggled with unprecedented load.” It then went down on Tuesday, March 3. And then a third outage occurred on Monday, March 9. All three days saw volatility in the markets. 

“We take our responsibility to you and your money seriously. We recognize that many of you have questions, and we’re working to respond to them as quickly as possible,” the company said in a statement on its website.

Robinhood did not immediately respond to requests for comment. 

Rebecca Rose Woodland, a litigator, joined TheStreet to talk about the legal ramifications that the app could face.

Watch the full video above for more. 

Video Transcript:

Katherine Ross:
Robin Hood has been in the news for all the wrong reasons. With me to break down what's next for the investing app is Rebecca Rose Woodland litigator and legal analyst. Rebecca, what kind of legal ramifications is Robin Hood going to have following the three day outages?

Rebecca Rose Woodland:
Well this is a really interesting situation because we've had such volatility in the market and Robin Hood is a mobile based trading app that all of a sudden three times, three days, we don't exactly know the amount of time each day that they were out, but a lot of users experienced long periods of time that they could not operate their mobile app so they couldn't execute trades. What we're seeing is the possibility of a class action, one was filed in Tampa. It has to be certified, which means a judge has to review it to see if there would be the legal aspect of a class, no matter that class gets certified. There will be multiple lawsuits against this application.

Rebecca Rose Woodland:
They're based in Menlo, California. They're a fast growing company. But the problem is if you don't have the infrastructure to support it and that's the claim of the people who lost or claim they lost money. But the infrastructure to support the amount of people on the app when the trading became very volatile during these last few days due to coronavirus they couldn't support the work and the efforts that needed to be done to make those trades happen.

Katherine Ross:
If I'm an investor who is impacted by any of these outages, what is your advice for me?

Rebecca Rose Woodland:
So these investors should really look at the contract they had. So look at what they, when they signed up to the app, look at what it says. Also go seek an attorney. Speak to someone so that you can understand what your rights are. You may have lost a tremendous amount of money. You may have not had a gain, which can be considered a loss. So even let's say your stock was devaluing and you wanted to execute a trade, well that would be an on paper loss that you could have avoided. Also, if you were shorting something that was going down that was a gain you have not partaken in. These are all aspects of a case that a plaintiff could make and Robin Hood on their behalf, will probably have some sort of disclaimer in their application due to failures that were beyond what would be normal and the volatility that they experienced that day. So we'll have to see how this plays out. Defense, plaintiff and who wins here.

Katherine Ross:
Rebecca, thank you so much for joining us today.

Rebecca Rose Woodland:
Thank you Katherine.