The End of Robinhood: Lawsuit.

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2021년 1월 28일 밈주식 숏스퀴즈 당시 로빈후드가 GME·AMC 등을 PCO(매수 제한) 처리한 것을 다룬 소송 분석 영상. 제기된 쟁점은 과실·중과실·수탁의무 위반이며, DTCC 증거금 요구(1월 28일 30억 달러 요청), 내부 메신저 발언, 시타델과의 담합 의혹 등을 정리함. 로빈후드는 이후 34억 달러를 조달했고 CEO는 유동성 위기가 아니라고 발언했음. 결론은 판사의 판단에 맡김.

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01. hey everyone me kevin here something has gone absolutely horribly wrong at robinhood and at robinhood in this massive lawsuit facing robin hood folks first in case you don't know on january 28 2021 there was a massive short squeeze a once in a decade style short squeeze led by a retail trading movement to squeeze the short sellers or people who sell a stock into oblivion and crush them by basically making them buy the stock back at much more expensive pricing thanks to them losing billions of dollars in margin calls because the stock was going to the moon and that's what was happening on january 28th stocks like amc and gamestop were skyrocketing absolutely going to the moon but all of a sudden in the middle of this once in a decade short squeeze robinhood who's supposed to take from the rich and give to the poor potentially colluded with the rich companies like citadel or melvin capital whatever and ended up preventing the poor from making money against the rich by turning off their ability to buy stocks like gamestop and amc in fact you're going to hear a lot about this because this is called pc owing position close only or moving stocks to position close only in this particular lawsuit that we're going to go through robinhood was not the only brokerage that did this you had td ameritrade weeble and other brokers who also had to move certain positions to a pco and that's because in the whole clearing world there are these other agencies and companies and corporations that can demand certain deposits from companies like robin hood or td ameritrade or weeble or whatever and these deposits go up based on the levels of risk that are currently in the market and on january 28th the morning of january 28th the levels of risk were so high in the market because certain stocks like gamestop and amc had gone so ridiculously high so crazy high that risks of a potential financial collapse were clearly imminent that specific corporations and agencies like the dtcc required massive deposits from companies like robin hood and we boom fidelity and they then decided to move certain stocks to position close only which basically forced people to no longer be able to buy shares of companies like gamestop and amc and when we're in a short squeeze we know that momentum keeps a short squeeze going but if you can't buy the stock you can't keep the momentum going and then all of a sudden the stocks came crashing down much to the benefit of wealthy companies that were getting burned like citadel and to the demise of retail traders like you and i folks in this video we're going to look at the lawsuit and i want you to ask yourself if you're the judge looking at this case could you possibly first of all put on an impartial hat and not try to burn robin hood to the ground before hearing the case well it's up to you but in this video what i'm going to do is i'm going to start by showing you the counts against robinhood count one negligence negligence what does this mean negligence is basically saying that robin hood had a duty to make sure its platform was up and would not fail but remember other platforms were shut down as well and or trading for certain stocks were shut down as well so this is gonna be a good defense for robin hood it's pointing to the other brokers it wasn't just robin hood why robinhood's gonna have to come out with statistics and big old math to go this was a a three sigma event which is a fancy way of saying it's a one in like five million chance of happening uh and and uh they might make the argument that it was a one in ten sigma event that this this whole short squeeze happening was something you could have never prepared for now usually what does negligence mean well negligence usually means by example that you did something stupid but you didn't think you were going to hurt someone that you should have known better but you didn't actually think you were going to hurt someone so negligence as a judge is it possible that robin hood was negligent in what happened let me give you an example let's say you're in the middle of a desert and there's a stop sign four-way stop you're going 80 miles an hour nobody's around you're like f that i'm going through that stop sign and you blow that stop sound real hard but then you cause an accident that is negligent you didn't think you were going to cause a problem but you're kind of stupid and you made a mistake anyway and you caused an accident that's a negligence the argument here from the plaintiffs is robin hood you stupid you should have never had to be pushed into the situation where you would ever ever ever have to cl put move stocks to position close only it's not fair you should have been capable robin hood again is going to have to defend with statistics going this was a statistical probability we could have never known that that stop sign was there that's going to be the argument we'll see what the judge says but the next count that i have is gross negligence now gross negligence goes a little further that's like saying you literally saw families pushing strollers in that four-way stop and you decided to floor through it anyway that's grossly negligent that's like you knew what you were doing is bad that's like a doctor prescribing somebody penicillin when in the medical file it says they're allergic to penicillin very very very bad okay that that that would potentially crush crushed robinhood is a grossly negligent uh you know claim uh actually being a guilty or becoming a guilty verdict breach of fiduciary duty this one's a little bit of a stretch and we'll see we're going to go through the arguments in the moment here so for example when i'm a real estate agent and i'm selling a house that's i have a fiduciary duty to my client if the client if the house is crap i need to tell my client that like don't buy this house i've done that before as a broker but stock brokers and stock brokerages don't have this obligation they don't have as many fiduciary duties they have some there was regulation bi that passed that that created some but usually this only applies to brokers who are actually trading on behalf of their clients it's kind of like hey i'm going to take your money invested for you that might create some like standards or suitability standards that require you to have to elevate your uh your care for your client and there are differences between fiduciary and suitability we're not going to get into that in this video because it's not what this is about robinhood doesn't invest in clients money it's a trading platform and so this lawsuit is trying to allege yeah but you all basically were fiduciaries for your clients you should be fiduciaries this would be a huge change for the brokerage industry like every broker would probably have to dramatically increase their fees if they were deemed to be fiduciaries because now they're basically responsible for making sure that when you're yolo option trading you're not doing something that's stupid and could hurt yourself and fiduciary again means brokers have to tell you things even if it means they make less commissions which in some senses is good especially if you're you're really advising your client you're an advisor but for a trading platform i don't know does anybody actually think of robinhood as an advisor i mean i don't think of robin hood as an advisor but we'll see that's an interesting one then they also suggest implied duty of care and they go through these complaints that hey robin hood's gamifying the platform you know they're doing the sparklies and the confetti and stuff when you buy okay fine let's get into the juicy stuff more importantly though and this is going to be where where it gets a little bit fun so this lawsuit starts off by saying this case is about the extreme divergence between the professed belief about how robin hood actually runs its business basically they're saying hey we thought one thing about robinhood it's actually something else and they specifically talk about january 28th which is worth noting if you type into youtube right now robinhood banned sec and the state it's you're going to see a video from me from may 12th where i break down a massive massive sec settlement with robin hood for shenanigans that rob and i have screwed up with in the past but those that settlement had to do with everything leading up to january 28th 2021 january 28 2021 is still on the table for the sec so you can bet the sec is going to be watching this lawsuit here but let's get to some of the juicy stuff here uh because again this is where you're going to see by suspending one side of the transaction they basically hurt retail traders okay but we want to get to some of the juicy stuff here some of the juicy stuff here that i found and i highlighted this to make it simple and we're going to streamline this one of the things was here robin hood product manager recognized the danger of the pco policy we're going to get crucified for pc owing and i wrote oops quote david says we are too big for them to actually shut us down in other words this is a reference to remember how i said certain agencies required large deposits from robinhood like they can't shut us down uh yeah but they could actually make you uh shut certain stocks down by making the deposit requirements insanely high so some of this is like ah was robin hood at fault or is robin hood the face of this right and that's going to be a big big big out for robin hood in this case like was it would robin hood have have had to change these things if robin hood uh didn't have these crazy requirements imposed on them from like the the dtcc right anyway but they say here we're going to get crucified for this and look at the time 5 35 a.m like an hour before the market opens right 55 minutes for pc owing now uh then they they say here that uh contrary to ceo vlad tenef's assertion the events at issue in this case are not aptly described as a black swan or five sigma event robin hood was knowingly pushing the envelope under the assumption that it was untouchable this is an interesting counter argument that they're making because they already know what robin hood's going to allege they're basically saying hey you guys were cavalier you thought when you went to go run that stop sign you were gonna be okay it's an interesting argument they're making here and they're even using the fact that robinhood ramped up its marketing while the platform was redlining as an argument against robin hood now this i don't know if i could say that because the gamestop short squeeze really began kind of like on i mean it began earlier in january but things in terms of redlining really started like things started really going nuts around january 24th to 25th uh and full disclosure i own robin hood stock but i'm gonna totally be a bully here okay and we're gonna we're gonna tear into robin hood where they're wrong i'm just gonna be very very transparent i do own some robin hood stock uh and uh at the beginning of january i was a robin hood affiliate because for the first time ever robin hood gave people the opportunity to get four free stocks with robin hood that was insane they and they started that agreement i want to say at the end of december and then they started the actual like offer somewhere around january 19th and it was supposed to go from the 19th through the 31st which why does that matter because a lot of statistics show that robin hood's usage like skyrocketed and there was this big inflection point up in its user base right around the end of january when this debacle was happening but it was also the first time ever that robin hood did hey sign up and get four free stocks with robinhood they used to have this get one free stock thing four free stocks was crazy was the only time they ever did that and they got affiliates on board like youtube or content creators it was insane so uh but that again happened before the short squeeze it's just kind of interesting though because robinhood's like hey look we went through this crisis and our user base still skyrocketed yeah well that you had a massive marketing campaign that you've never had before and now this lawsuit is using that against you guys uh but i don't know how fair that is again though because that marketing campaign happened uh and was decided well before this whole short squeeze stuff again i know because i was one of the affiliates and again i stopped pitching them during this whole gamestop disaster because that would be ridiculous but anyway so 10f points to making the ultimate call in pcoeing but this is very interesting take a look at this one robin hood security's president and co and ceo james swart wow okay whatever the ceo said in an internal chat on january 26th i sold my amc today fyi tomorrow morning we are moving gamestop to 100 position close only so you're aware like that's shady okay this right here that's shady but the problem with this is i wonder how much of this stuff happens like this is the cosy or the coo of robin hood should not be trading amc on what's happening internally at robinhood that particularly here is shady so it's not a surprise that they bring this up right away that's a big oopsies and that individual by the way should get smacked by the scc and probably will for that by the way and it's not going to help robinhood in this lawsuit now here's where things start going cookies on january 25th 2021 robinhood securities received an nscc daily margin statement from the dtcc remember these are those crazy corporations that basically provide those requirements of how much capital you have to have on january 25th robin hood need to post it or needed to post 11 million dollars not a big deal reflecting vola volatility on the same day they upped the amount robin hood needed to post to 74 million dollars no problem robin hood did this and did this even though same day they got a big bump robin hood fulfilled it the next day on the 26th they got a requirement that we need 85 million dollars robin hood posted it on the 27th they got a notice that robin hood actually had a surplus of 11 million dollars things that settled down a little bit on later on the 27th they mentioned that the nscc may be making intraday calls for additional capital and that on the 27th at 10 32 p.m robin hood sent an internal email saying that robin hood needed to borrow 3 million 300 million for the parent to cover cash deficit mainly driven by these clearing corporations so robinhood this makes sense businesses have open lines of credit that they'll that they'll draw on and then they'll take that money and use it for you know day-to-day purposes and then when they get the money back from like these deposits they pay off the credit lines makes sense but on january 28th at 5 11 a.m they were told they needed 3 billion which keep in mind the prior days they had high volatility they needed look at this up to 400 million dollars this is when they borrowed 300 million dollars like oh my gosh all of a sudden that's like a lot of money they have the availability of funds but when they got the three billion dollar requests and if an intraday call is made all deficits must be received within an hour of the notice of this letter you can kind of see here that a lot of burden is coming from the dtcc which that's gonna be a big out for robin hood but anyway robin hood here says okay that's it we're gonna pco position close only meaning retail buyers can't buy amc gme nokia and blackberry because we aren't paying three billion dollars worth by basically pc owing this they can reduce the margin requirements from like three billion dollars probably to like 600 million dollars or whatever see look at this uh three billion dollars uh we aren't paying three billion dollars worth so by pc owing these four symbols they were able to bring the margin required down to 600 million dollars this lawsuit is basically saying hey robinhood you should have had three billion dollars available and there was a big thing that i already made a video about it was a big thing about robin hood's ceo on the 29th saying we are not facing a liquidity crisis on cnbc but the day before on the 28th an internal executive said we're facing a liquidity crisis and it's worth noting that on the 28th robin hood executives didn't have the money but on the 29th robin hood raised over 2 billion dollars from investors and i was able to get the money they needed uh to make sure they they had plenty here actually oh my gosh they ended up in two days they raised 3.4 billion dollars in just two days now this is interesting because the lawsuit is using not only the the misleading nature of one executive saying hey we have a liquidity crisis and then the ceo the next day saying well no we don't we don't have a liquidity crisis on cnbc uh and that's possibly because they raise the money right they are taking this a step further the plaintiffs and they're saying hey look why didn't you just raise the money on the morning of so that way you didn't have to pco why didn't you just if you could raise 3.4 billion dollars in two days why didn't you do it on that day and why didn't you keep gamestop and amc alive why did you crush retailers dreams in a once in a decade short squeeze interesting argumentation here right so anyway i'm summarizing some things because this is an 80 page lawsuit worth noting by the way that in another lawsuit there's even talk about executives at robinhood getting on a call with citadel because take a look at this there's anecdotal evidence this is in a robinhood chat internal chat there's anecdotal evidence that several very large firms were having really bad nights too and fyi that dan and i are joining jim at 5 p.m on a call with citadel this is robin hood execs they reached out and want to speak this evening and we believe that they will make some demands on limiting payment for order flow across the board we won't agree to anything but wanted to give you a heads up vlad even mentions this might be a time for me to chat with ken griffin which this is where we have to talk about the fact that ken griffin after this whole debacle happened in january testified before congress and when he was bluntly asked did you collude with robin hood he said no now a lot of folks are like come on man the definition of collusion is cooperate in secret in an unlawful way okay maybe not unlawful right cooperate in secret in order to deceive or gain advantage over others that part i could see now the unlawful thing tbd we'll find out in courts right there could be more civil implications here rather than criminal implications but colluding is cooperating in secret in order to deceive or gain an advantage over others there's an argument to be made there abso freaking lootly so you know was there collusion with with robin hood well i don't know if he should have said no he should have probably i mean i don't think he should have said yes because that's admitting guilt and that would be like dumb uh but he probably should have said something like hey we had multiple conversations with robin hood we don't think having conversations with our client rises to the level of collusion but him saying bluntly no and that when when you know the record shows they did have meetings now were those secret meetings i mean they certainly weren't public meetings right uh was it done to deceive or gain an advantage over others or was it done in the ordinary course of business well that's uh tbd however in the court of public perception as was trending on twitter ken griffin lied and this has led to massive allegations that potentially robin hood colluded with citadel which is basically think about like a collusion like a cartel where a cartel gets together and says hey we're going to do this to screw somebody else now in fairness robin hood does payment for order flow and some of that flows through citadel citadel is a service provider for robinhood which makes robinhood a client of citadel in fact over here you can see robinhood makes a lot of money with payment for order flow but it's not just them in june for example june 2021 they made 21 million dollars in payment for order flow in january which is when this crisis happened they made 47 million dollars in payment for order flow from op or from from equities so from shares and from options in january 2021 they made 65 million dollars and you could kind of compare this to other companies here robin hood makes the most money from payment for order flow from options but not the most money from uh from shares i believe at least presently they don't presently td ameritrade beats them on shares but anyway they make a lot of money from payment for order flow and citadel is one of the companies that provides this so there's going to be argumentation that there was even collusion between citadel and robin hood but remember they have a client uh relationship a business relationship not that necessarily makes a difference but uh folks i want to ask you do does what happened with robin hood rise to the level of negligence say this in the comments negligence did robin hood fail by not having enough money should they have raised three billion dollars earlier to even if they got to this extreme situation they could have prevented the disaster even though other brokers did the same thing should robin hood have raised that money sooner did vlad lie when he said we didn't don't have a liquidity crisis even though the executive the day before said we have a liquidity crisis they did raise 3.4 billion but was that a lie by vlad so you got yourself did vlad lie was there collusion between citadel and robin hood despite their client uh and service provider relationship was there collusion between the two to stop these trades or was it the dtcc in the nscc and their margin requirements that screwed robin hood into the situation i don't know maybe it was a little bit of both that's the thing things aren't usually black or white and that's where a judge is going to have to come in and this is where i want to ask you leave a comment down below was robin hood negligent they ran the stop sign thinking everything was going to be okay were they grossly negligent they ran the stop sign knowing things were probably not going to be okay but they did it anyway or is this a totally not guilty for you do you believe that robin hood should be totally off the hook here because it wasn't their fault that this was a five sigma event a one in three and a half million chance of happening or whatever and ultimately should robin hood be let off the hook for this well folks let me know in the comments down below but this gives you a little bit of insight into what the heck is going on with robinhood ]