June 2023 - Robinhood | 2nd Runner Up
Robinhood is a stock trading and investing app that boasts commission-free, insured trading from the convenience of your phone. While their mission was admirable — democratizing finance for all, not just the wealthy — their execution was rotten. Robinhood faces accusations of bad business practices, inadequate risk management and a need for more oversight — and that’s just from a single report.
Robinhood’s very public mishandling of the GameStop Corp “meme stock boom” in January 2021 is what first caused big names, like the Financial Industry Regulatory Authority (FINRA), to start taking a closer look at what was going on behind the scenes. Robinhood froze GameStop trades when they realized they didn’t possess the collateral required to settle the uptick in trades (caused by a surge in popularity proliferated on forums like Reddit), resulting in a deficit of approximately $3 billion.
Robinhood often freezes trades or has outages during crucial moments, which end up costing users. Robinhood has also been caught falsely listing businesses as bankrupt, glitching people’s money out of their accounts, refusing to cash profitable bets against Silicon Valley Bank and championing a business model that rewards practices (like order flow trading) that create market volatility.
In July 2021, Robinhood was fined $70 million by FINRA — the most significant penalty ever dished out. But with the characteristic persistence of the entitled, that wasn’t enough to stop them. Despite the warnings and repercussions, Robinhood continues to be everything that’s wrong with the “app-ification” of trading platforms, a business model that fundamentally does not work.
Theoretically, making stock trading widely accessible is great. But practically, a platform that can’t be trusted is not. Robinhood.Sucks could be used to extol the virtues and examine the risks of app-based investing.