Case 1:21-md-02989-CMA Document 359 Entered on FLSD Docket 07/27/2021 Page 1 of 74
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF FLORIDA
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`CASE NO. 21-2989-MDL-ALTONAGA/Torres
`
`
`In re:
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`JANUARY 2021 SHORT SQUEEZE
`TRADING LITIGATION
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`_________________________________/
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`This Document Relates to All Claims Included
`in the Robinhood and Other Broker Tranches
`
`
`CONSOLIDATED CLASS ACTION COMPLAINT
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`Case 1:21-md-02989-CMA Document 359 Entered on FLSD Docket 07/27/2021 Page 2 of 74
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`
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`TABLE OF CONTENTS
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`INTRODUCTION .................................................................................................................................... 1
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`JURISDICTION AND VENUE ....................................................................................................6
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`THE PARTIES ...............................................................................................................................7
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`Plaintiffs ...........................................................................................................................7
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`
`I.
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`a. Robinhood Plaintiffs .............................................................................................7
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`b. Apex Plaintiffs ....................................................................................................12
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`II. Defendants .....................................................................................................................13
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`a. Robinhood ...........................................................................................................13
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`b. Apex ....................................................................................................................17
`FACTUAL ALLEGATIONS ......................................................................................................18
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`I. The Robinhood Business Model .....................................................................................19
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`a. History and Growth................................................................................................19
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`b. Driving Force in Bringing New Investors to the Marketplace: the “Gamification”
`of Trading...............................................................................................................21
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`
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`II.
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`c. “Payment for Order Flow” and Robinhood’s Role in Driving the Market
`Volatility it was Unprepared to Address ................................................................23
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`d. Rapid Growth Leads to Systemic Failures: History of Compliance Issues ...........24
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`a. Managing Market Risk: Collateral Deposit and Capital Requirements.................26
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`b. Governing Broker FINRA Rules and Regulations ................................................30
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`Industry Standards ..........................................................................................................26
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`c. Circuit Breakers: Procedures for Brokers to Operate During Times of Extreme
`Market Volatility ....................................................................................................31
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`III. The January 2021 “Short Squeeze” ..............................................................................32
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`a. Price Volatility Ahead of January 28, 2021 Was Well-Known to Defendants .....32
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`IV. Robinhood was on Notice of the Risk Associated with the Volatility.........................34
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`a. The $3 Billion Capital Call ....................................................................................39
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`b. Defendants’ Unprecedented, One-Sided Trading Restrictions ..............................45
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`i. Robinhood ..................................................................................................45
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`ii. Apex ...........................................................................................................50
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`c. The January 28, 2021 Trading Restrictions Catch the Attention of Regulators ....54
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`d. Trading Restrictions Continue After January 28, 2021 .........................................55
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`V. Government Investigations into the January 2021 Short Squeeze ..............................57
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`CLASS ACTION ALLEGATIONS ...........................................................................................59
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`I. Nationwide Investor Class .....................................................................................59
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`II. Broker Classes .......................................................................................................59
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`A.
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`Robinhood Class ............................................................................59
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`B.
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`Apex Class .....................................................................................60
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`CAUSES OF ACTION ................................................................................................................63
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`COUNT I – Negligence (against Robinhood) .......................................................63
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`COUNT II – Gross Negligence (against Robinhood) ..........................................64
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`COUNT III – Negligence Per Se (against Robinhood) ........................................66
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`COUNT IV – Breach of Fiduciary Duty (against Robinhood Securities and
`Robinhood Financial) ............................................................................................67
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`COUNT V – Negligence (against Apex) ..............................................................69
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`PRAYER FOR RELIEF..............................................................................................................69
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`DEMAND FOR JURY TRIAL ...................................................................................................70
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`ii
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`
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`Plaintiffs Andrea Juncadella, Cody Hill, Edward Goodan, Jaime Rodriguez, Jonathan
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`Cornwell, Joseph Daniluk, Mark Sanders, Patryk Krasowski, William Makeham, Sammy
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`Gonzalez, Julie Moody, Erik Chavez, and Peter Jang (collectively, “Plaintiffs”), on behalf of
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`themselves and all other similarly-situated customers and investors (the “Class”), bring this
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`Consolidated Class Action Complaint against Defendants, Robinhood Markets, Inc., Robinhood
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`Financial LLC, Robinhood Securities, LLC (collectively, “Robinhood”), and Apex Clearing
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`Corporation (“Apex”), for negligence and breach of fiduciary duty, demanding a trial by jury.
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`INTRODUCTION
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`Through Robinhood Market, Inc.’s Registration Statement for its upcoming Initial
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`1.
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`Public Offering (“IPO”), Robinhood continues to emphasize equal access to financial markets and
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`claims, “Our founders deeply believe that everyone should have access to the financial system.”
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`See Robinhood Markets, Inc., Form S-1 (“Robinhood S-1”), at 8 (July 1, 2021), as amended July
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`19, 2021 (emphasis added). This case is about the extreme divergence between that professed
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`belief and how Robinhood actually runs its business.
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`2.
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`On January 28, 2021, Robinhood and others took unprecedented action to render
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`the financial system inaccessible to millions of customers and investors by deleting, at the push of
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`a button, billions of dollars’ worth of demand for certain “hot stocks”—wiping away over 10
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`billion dollars ($10,000,000,000) in “hot stock” market caps.
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`3.
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`Leading up to January 28, 2021, Plaintiffs and the Class were aggressively
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`recruited—through marketing and addictive user interfaces—to Robinhood’s platform for trading
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`popular “hot stocks,” including the following symbols: GameStop Corporation (symbol: GME),
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`BlackBerry Ltd. (symbol: BB), Nokia (symbol: NOK), AMC Entertainment Holdings, Inc.
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`(symbol: AMC), AMC Networks, Inc. (symbol: AMCX), American Airlines Group, Inc. (symbol:
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`1
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`AAL), Bed Bath & Beyond, Inc. (symbol: BBBY), Castor Maritime Inc. (symbol: CTRM),
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`Express, Inc. (symbol: EXPR), Koss Corporation (symbol: KOSS), Naked Brand Group Ltd.
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`(symbol: NAKD), Sundial Growers, Inc. (symbol: SNDL), Tootsie Roll Industries, Inc. (symbol:
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`TR), and Trivago NV (symbol: TRVG) (collectively, the “Suspended Stocks”).
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`4.
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`Robinhood’s business model was designed to attract a demographic most likely to
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`trade in “hot stocks” and boost order flow in “hot stocks,” which Robinhood knew were extremely
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`volatile. Robinhood, in fact, monetized the order flows for such stocks, but as a true amateur among
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`institutional brokers, failed to protect itself, the financial markets, and its customers from the
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`systemic risks that came with fueling volatile trading. As described herein, Robinhood did not
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`have appropriate cash reserves to meet the well-defined margin requirements to support the market
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`activity that it was facilitating.
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`5.
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`While Robinhood built its business to attract inexperienced, first-time traders, who
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`focused on these “hot stocks,” it failed to sufficiently capitalize its business according to the rules
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`designed to protect the market and traders from at-risk brokers that maintain high concentrations
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`of volatile stocks.
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`6.
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`Reporting on an interview of a former trading executive at TD Ameritrade, the New
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`York Times wrote, “[Robinhood] w[as] trying to change the rules of the road without understanding
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`how the road was paved and without any respect for the existing guard rails . . . [Robinhood] ended
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`up creating risk for their customers and systemic risk for the market more broadly.”1
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`7.
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`Although Robinhood is a startup of recent vintage, the nascent company has
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`already paid all-time record-breaking penalties, including the largest financial penalty ever
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`1 Nathaniel Popper, Matt Phillips, Kate Kelly, and Tara Siegel Bernard, The Silicon Valley Start-Up that Caused
`Wall Street Chaos, NY. Times (Jan. 30, 2021), https://www.nytimes.com/2021/01/30/business/robinhood-wall-
`street-gamestop.html.
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`2
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`ordered by FINRA for “systemic supervisory failures and significant harm suffered by millions of
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`customers.”2 Robinhood has paid approximately $135 million to the U.S. Securities and Exchange
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`Commission (“SEC”) and Financial Industry Regulatory Authority (“FINRA”) to settle allegations
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`that it misled customers about its use of payment for order flow, outages on its app, and its failure
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`to seek the best reasonably available terms to execute customer orders.
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`8.
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`Despite its short existence, Robinhood’s history is replete with serious and
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`profound regulatory failures. Robinhood’s pattern of indifference to known risks left it woefully
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`unprepared to address the events of January 2021.
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`9.
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`Beginning on January 28, 2021, Robinhood, without seeking or receiving approval
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`from the SEC, FINRA, nor any market regulator, removed one or more of the widely-traded
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`Suspended Stocks from its trading platform, prohibited investors from purchasing shares of, or call
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`options on, the Suspended Stocks, and/or unilaterally sold the Suspended Stocks at rock-bottom
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`prices from customer accounts. On January 29, 2021, Robinhood began to allow only extremely
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`limited purchases of shares of, or call options on, the Suspended Stocks, and did not remove all
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`restrictions until February 4, 2021. The period between January 27, 2021 and February 23, 2021,
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`is referred to herein as the “Class Period.”
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`10.
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`Likewise, Apex Clearing Corporation, a broker-dealer registered with the SEC and
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`a member of FINRA, that provides clearing broker services to introducing broker-dealers,
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`including, but not limited to, Ally Financial, Dough, M1 Finance, Public.com, Sofi, Stash,
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`Tastyworks, and Webull (collectively, the “Apex Introducing Broker-Dealers”), took the
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`unprecedented step of unilaterally and abruptly instructing its clients, including Apex Introducing
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`2 See “[Robinhood] Ordered to Pay Approximately $70 Million for Systemic Supervisory Failures and Significant
`Harm Suffered by Millions of Customers,” available at https://www.finra.org/media-center/newsreleases/2021/finra-
`orders-record-financial-penalties-against-robinhood-financial.
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`3
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`Broker-Dealers, to block purchases of AMC, GME, and KOSS, on January 28, 2021, based on a
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`possible future collateral requirement that Apex
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`.
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`11.
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`Contrary to governing industry rules and regulations aimed at addressing market
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`volatility, their fiduciary duties of care and loyalty as broker-dealers, and customer expectations,
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`Defendants failed to adequately mitigate risk and knew or should have known that their abruptly
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`implemented, one-way trading restrictions would harm their customers and investors.
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`12.
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`By imposing restrictions on only one side of the transaction—the buy side—and
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`depriving Plaintiffs and other members of the Class of the ability to purchase the Suspended
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`Stocks, the majority of which were traded on its platform, while allowing selling to continue,
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`Robinhood artificially depressed prices of the Suspended Stocks.
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`13.
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`Robinhood’s internal documents reveal
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`14.
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`As Robinhood’s own Co-Founder, Vladimir Tenev (“Tenev”), admits, Robinhood
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`could not pay its clearinghouse-mandated deposit requirements when the call came in the morning
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`of January 28, 2021. See Tenev Testimony, Robinhood Markets, to U.S. House Financial Services
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`Committee, at 9 (Feb. 18, 2021). Even after the National Securities Clearing Corp. (“NSCC”)
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`exercised its discretion in reducing the call to protect the system from Robinhood Securities’
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`4
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`JURISDICTION AND VENUE
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`This Court has subject-matter jurisdiction over this action pursuant to 28 U.S.C. §
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`19.
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`1332(d)(2) because this is a class action subject to the Class Action Fairness Act (“CAFA”), Pub.L.
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`No. 109-2, 119 Stat. 4 (codified in various sections of 28 U.S.C.), with aggregate claims of all
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`members of the proposed class and subclass(es) in excess of $5 million, exclusive of interest and
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`costs, and there are more than 100 putative Class Members. Many members of the proposed Class
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`are citizens of a state different from Defendants. This Court also has supplemental jurisdiction
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`over state law claims pursuant to 28 U.S.C. § 1367 because they form part of the same case or
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`controversy as the claims within the Court’s original jurisdiction.
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`20.
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`This Court is the proper venue for this action because the Judicial Panel for
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`Multidistrict Litigation determined that the actions that are before this Court should be centralized
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`in this Court pursuant to 28 U.S.C. § 1407.
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`21.
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`Jurisdiction and venue are proper in this District pursuant to 28 U.S.C. § 1391
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`because one or more of the Defendants reside in this District or are licensed to do business in this
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`District. Each Defendant has transacted business, maintained substantial contacts, or committed
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`tortious acts in this District, causing injury to persons residing in, located in, or doing business
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`throughout the United States, including in this District.
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`22.
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`This Court has personal jurisdiction over each Defendant because, each Defendant:
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`(a) transacted business throughout the United States, including in this District; (b) transacted in
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`substantial amounts of the Suspended Stocks throughout the United States, including in this
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`District; (c) had substantial contacts with the United States, including this District; and/or (d)
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`engaged in actions that had a direct, foreseeable, and intended effect of causing injury to the
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`6
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`business or property of persons residing in, located in, or doing business throughout the United
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`States, including in this District.
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`23.
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`This Court has personal jurisdiction over Defendants under Florida’s long-arm
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`statute, through Defendants’ operation of businesses in this District. Defendants operate, conduct,
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`engage in, and carry-on business or business ventures in this state or have an office or agency in
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`this state; have caused injury to persons or property within this state arising out of an act or
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`omission by the Defendants outside this state, while the Defendants were engaged in solicitation
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`or service activities within this state. Defendants regularly do or solicit business, or engage in other
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`persistent courses of conduct, or derive substantial revenue from goods used or consumed or
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`services rendered in this state. The activities of Defendants within the state are substantial and not
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`isolated. In addition, this action arises, in part, out of a decision to halt buying that was effectuated
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`in Florida by Robinhood Securities, LLC, a company headquartered in Florida.
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`PARTIES
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`
`I.
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`Plaintiffs
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`a. Robinhood Plaintiffs
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`i. Plaintiff Andrea Juncadella
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`Plaintiff Andrea Juncadella is a resident of the State of Florida.
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`24.
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`25.
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`Plaintiff Juncadella is an investor who used Robinhood as her broker-dealer and
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`owned or held shares in the Suspended Stocks during the Class Period.
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`26.
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`As of end of the day on January 27, 2021, Plaintiff Juncadella held 400 shares of
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`AMC stock and 5 shares of GME stock.
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`27.
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`On February 9, 2021, Plaintiff Juncadella sold all of her shares in GME and AMC
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`for less than what she would have sold for but for Robinhood’s negligence and breach of fiduciary
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`duty alleged herein.
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`ii. Plaintiff Edward Goodan
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`Plaintiff Edward Goodan is a resident of the State of Florida.
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`Plaintiff Goodan is an investor who used Robinhood as his broker-dealer during
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`26.
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`27.
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`the Class Period.
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`28.
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`As of end of the day on January 27, 2021, Plaintiff Goodan held 168.6 shares of
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`AMC stock.
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`29.
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`On February 1, 2021, Plaintiff Goodan, sold all of his 168.60 shares in AMC for
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`less than he would have sold for but for Robinhood’s negligence and breach of fiduciary duty
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`alleged herein.
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`30.
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`As of end of the day on January 27, 2021, Plaintiff Goodan held 11 call options on
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`AMC stock, representing options 1,100 shares of AMC stock.
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`31.
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`On January 28, 2021, Plaintiff Goodan, sold all of these call options on AMC stock
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`for less than he would have sold for but for Robinhood’s negligence and breach of fiduciary duty
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`alleged herein.
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`28.
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`On January 29, 2021, once Robinhood permitted limited buying of options,
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`Plaintiff Goodan purchased 41 call options on AMC stock representing options on 4,100 shares of
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`AMC stock.
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`32.
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`On February 1, 2021, after Robinhood reintroduced restrictions on buying, sold
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`Plaintiff Goodan sold all 41 of his call options on AMC stock for less than he would have sold for
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`but for Robinhood’s negligence and breach of fiduciary duty alleged herein.
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`iii. William Makeham
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`33.
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`Plaintiff William Makeham is a resident of the State of Florida.
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`8
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`34.
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`Plaintiff Makeham is an investor who used Robinhood as his broker-dealer during
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`the Class Period.
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`35.
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`As of end of the day on January 27, 2021, Plaintiff Makeham held 6 call options
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`on AMC stock, representing options on 600 shares of AMC stock.
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`36.
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`On January 29, 2021, once Robinhood permitted limited buying of options,
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`Plaintiff Makeham purchased 44 call options on AMC stock and 9 call options on AMC stock,
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`representing options on 4,400 shares of AMC stock.
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`29.
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`On February 2, 2021, after Robinhood reintroduced restrictions on buying AMC
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`stock, Plaintiff Makeham sold all 45 of his call options on AMC stock for less than he would have
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`sold at but for Robinhood’s negligence and breach of fiduciary duty alleged herein.
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`iv. Mark Sanders
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`37.
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`38.
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`Plaintiff Mark Sanders is a resident of the State of Missouri.
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`Plaintiff Sanders is an investor who used Robinhood as his broker-dealer during
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`the Class Period.
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`39.
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`As of end of the day on January 27, 2021, Plaintiff Sanders held 761 shares of
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`AMC stock.
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`40.
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`On February 2, 2021, Plaintiff Sanders sold 621 shares of AMC stock for less than
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`he would have sold for but for Robinhood’s negligence and breach of fiduciary duty alleged herein.
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`v. Jaime Rodriguez
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`41.
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`42.
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`Plaintiff Jaime Rodriguez is resident of the State of Michigan.
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`Plaintiff Rodriguez is an investor who used Robinhood as his broker-dealer during
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`the Class Period.
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`43.
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`As of the end of the day on January 27, 2021, Plaintiff Rodriguez held 20.25 shares
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`9
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`of GME stock.
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`44.
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`On January 28, 2021, Plaintiff Rodriguez sold all 20.25 shares of GME stock for
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`less than he would have sold for but for Robinhood’s negligence and breach of fiduciary duty
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`alleged herein.
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`vi. Patryk Krasowski
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`45.
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`46.
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`Plaintiff Patryk Krasowski is a resident of the State of Illinois.
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`Plaintiff Krasowski is an investor who used Robinhood as his broker-dealer during
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`the Class Period.
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`47.
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`As of the end of the day on January 27, 2021, Plaintiff Krasowski held 9 call
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`options on GME stock, representing options on 900 shares of GME stock.
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`30.
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`On January 28, 2021, Plaintiff Krasowski sold all 9 of his call options on GME
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`stock for less than he would have sold for but for Robinhood’s negligence and breach of fiduciary
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`duty alleged herein.
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`48.
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`Plaintiff Krasowski also owned 6 call options to purchase GME stock. Just before
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`Robinhood restricted purchases of GME stock, this position could have been exercised and
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`proceeds realized in the amount of approximately $400,000.00.
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`49.
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`Plaintiff Krasowski attempted to exercise these calls, which would have resulted
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`in realized gains of approximately $400,000.00, but was blocked from exercising them by
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`Robinhood. Plaintiff Krasowki’s position with respect to these is now worth approximately
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`$200,000.00.
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`50.
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`51.
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`
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`vii. Plaintiff Cody Hill
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`Plaintiff Cody Hill is a resident of the State of Texas.
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`Plaintiff Hill is an investor who used Robinhood as his broker-dealer during the
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`Class Period.
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`52.
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`As of the end of the day on January 27, 2021, Plaintiff Hill held 538 shares of AMC
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`stock, 59 shares of BB stock, and 160 shares of NOK stock.
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`53.
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`On January 28, 2021, Plaintiff Hill sold all 528 shares of AMC stock, 59 shares of
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`BB stock, and 160 shares of NOK stock for less than he would have sold for but for Robinhood’s
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`negligence and breach of fiduciary duty alleged herein.
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`viii. Sammy Gonzalez
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`54.
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`55.
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`Plaintiff Sammy Gonzalez is a resident of the State of Florida.
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`Plaintiff Gonzalez is an investor who used Robinhood as his broker-dealer during
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`the Class Period.
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`56.
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`As of the end of the day on January 27, 2021, Plaintiff Gonzalez held 11.6 shares
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`of AMC stock.
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`57.
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`On February 9, 2021, Plaintiff Gonzalez sold all 11.6 shares of AMC stock for less
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`than he would have sold for but for Robinhood’s negligence and breach of fiduciary duty alleged
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`herein.
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`58.
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`59.
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`ix. Joseph Daniluk
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`Plaintiff Joseph Daniluk is a resident of the State of Illinois.
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`Plaintiff Daniluk is an investor who used Robinhood as his broker-dealer during
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`the Class Period.
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`60.
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`As of end of the day on January 27, 2021, Plaintiff Daniluk held 22 shares of GME
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`stock.
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`31.
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`On January 28, 2021, Plaintiff Daniluk sold 10 shares of GME stock for less than
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`he would have sold for but for Robinhood’s negligence and breach of fiduciary duty alleged herein.
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`11
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`x. Jonathan Cornwell
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`61.
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`62.
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`Plaintiff Jonathan Cornwell is a resident of the State of California.
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`Plaintiff Cornwell is an investor who used Robinhood as his broker-dealer during
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`the Class Period.
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`63.
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`As of the end of the day on January 27, 2021, Plaintiff Cornwell held 2.48 shares
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`of GME stock, 14.44 shares of NOK stock, and 6.8 shares of AMC stock.
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`64.
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`On February 2, 2021, Plaintiff Cornwell sold all 2.48 shares of GME stock, 6.8
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`shares of AMC stock, and 14.44 shares of NOK stock for less than he would have sold for but for
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`Robinhood’s negligence and breach of fiduciary duty alleged herein.
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`xi. Plaintiff Julie Moody
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`Plaintiff Julie Moody is a resident of the State of South Carolina.
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`Plaintiff Moody is an investor who used Robinhood as her broker-dealer during the
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`65.
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`66.
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`Class Period.
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`67.
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`On January 27, 2021, and prior to market opening on January 28, 2021, Plaintiff
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`Moody submitted orders for NOK, NAKD, and AMC stock.
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`68.
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`Plaintiff Moody’s last 58 shares of NAKD stock were confirmed by Robinhood at
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`approximately at 7:18 a.m. EST on January 28, 2021.
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`69.
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`Two hours later, on January 28, 2021, at approximately 9:20 a.m. EST, Robinhood
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`unilaterally cancelled Moody’s market orders for NOK, NAKD, and AMC stock.
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`b. Apex Plaintiffs
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`i. Erik Chavez
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`70.
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`71.
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`Plaintiff Erik Chavez is a resident of the State of Arizona.
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`Plaintiff Chavez is an investor who used Webull Financial LLC as his introducing
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`12
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`Case 1:21-md-02989-CMA Document 359 Entered on FLSD Docket 07/27/2021 Page 16 of 74
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`broker-dealer and Apex as his clearing broker. The trading account was carried by Apex
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`Corporation.
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`72.
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`As of the end of the day on January 27, 2021, Plaintiff Chavez held 607 shares of
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`AMC stock.
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`73.
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`On February 2, 2021, Plaintiff Chavez sold all of his shares of AMC stock for less
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`than he would have sold for but for the negligence alleged herein.
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`ii. Peter Jang
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`Plaintiff Peter Jang is a resident of the State of Maryland.
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`Plaintiff Jang is an investor who used Ally Invest Securities as his introducing
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`74.
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`75.
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`broker-dealer and Apex as his clearing broker. The trading account was carried by Apex Clearing
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`Corporation.
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`76.
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`As of the end of the day on January 27, 2021, Plaintiff Jang held 3,500 shares of
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`GME stock in his account at Ally.
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`77.
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`On February 4, 2021, Plaintiff Jang, who had journaled his shares of GME to a
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`different brokerage house, sold 401 shares of GME stock for less than he would have sold for but
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`for the negligence alleged herein.
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`II. Defendants
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`a. Robinhood
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`Defendant Robinhood Markets, Inc. (“Robinhood Markets” or the “Parent”) is a
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`78.
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`Delaware corporation, with principal executive offices at 85 Willow Road, Menlo Park, CA 94025.
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`Robinhood Markets is the corporate parent of Defendants Robinhood Financial, LLC and
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`Robinhood Securities, LLC. See Figure 1, below (Robinhood S-1, at 12).
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`Case 1:21-md-02989-CMA Document 359 Entered on FLSD Docket 07/27/2021 Page 17 of 74
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`Figure 1: Robinhood Organizational Structure
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`Robinhood Markets boasts a “Founder-Led, Passionate and Experienced Team,”
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`79.
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`created in 2013, by Co-Founders, Chief Executive Officer (“CEO”), President, and Director,
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`Tenev, and Chief Creative Officer, Baiju Bhatt (“Bhatt”), to “democratize finance.” (Robinhood
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`S-1, at 203). To “execute on this mission,” Robinhood Markets created a “Management Team”
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`that includes Chief Financial Officer (“CFO”) Jason Warnick, former VP of Finance and Chief of
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`Staff to the CFO at Amazon, Chief Marketing and Communications Officer Christina Smedley,
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`former VP of Marketing at Facebook, Chief Operating Officer, Gretchen Howard, former Partner
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`at CapitalG, Chief Legal Officer, Daniel Gallagher, former SEC Commissioner under President
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`Obama, and Chief Product Officer, Aparna Chennapragada, former VP and General Manager at
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`Google. (Robinhood S-1, at 12).
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`80.
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`Defendant Robinhood Financial LLC (“Robinhood Financial”) is a Delaware
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`limited liability company, with principal executive offices at 85 Willow Road, Menlo Park, CA
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`94025. Robinhood Financial is a registered introducing broker-dealer in securities under the
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`Securities and Exchange Act of 1934 and a member of FINRA. Robinhood Financial introduces
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`retail users to purchase and sell equities, options, and cryptocurrencies through the Robinhood
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`Case 1:21-md-02989-CMA Document 359 Entered on FLSD Docket 07/27/2021 Page 18 of 74
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`platform. Robinhood Financial has a clearing arrangement with its affiliate, Robinhood Securities,
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`LLC. Robinhood Financial is a wholly-owned subsidiary of Robinhood Markets.
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`81.
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`Defendant Robinhood Securities, LLC (“Robinhood Securities”) is a Delaware
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`corporation with its principal place of business at 500 Colonial Center Parkway, Suite 100, Lake
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`Mary, Florida 32746. Robinhood Securities is a registered clearing broker-dealer in securities and
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`under the Securities and Exchange Act of 1934 and a member of FINRA and the NSCC, a clearing
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`agency and subsidiary of the DTCC, which acts as a central depository for securities transactions
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`through its clearing agencies. Robinhood Securities clears equities and option trades for the retail
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`users through a clearing arrangement with Robinhood Financial. Robinhood Securities is a wholly-
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`owned subsidiary of Robinhood Markets.
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`82.
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`Robinhood Securities’ President and Chief Operating Officer (“COO”), James
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`Swartwout (“Swartwout”), is licensed by FINRA.
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`83.
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`Robinhood Market’s Co-Founder, CEO, President, and Director, Tenev, is not
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`licensed by FINRA.
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`84.
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`Unless otherwise specified, Robinhood Markets, Robinhood Financial, and
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`Robinhood Securities are collectively referred to herein as, “Robinhood.”
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`85.
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`Robinhood Financial and Robinhood Securities are single member, passthrough
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`limited liability companies, with all tax effects of income or loss included in the tax returns of their
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`Parent, Robinhood Markets.
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`86.
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`According to Robinhood Financial’s Annual Audited Report filed with the SEC,
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`as sworn to under oath or affirmation by Daniel Kelati (“Kelati”),4 as “Chief Financial Officer,”
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`4 According to LinkedIn, Kelati is now Robinhood’s FINRA-designated Finance and Operations Principal (“FinOp”),
`charged with ensuring regulatory compliance and protecting customers. In December 2018, Robinhood Markets hired
`Jason Warnick from Amazon to serve as CFO.
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`Case 1:21-md-02989-CMA Document 359 Entered on FLSD Docket 07/27/2021 Page 19 of 74
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`as of December 31, 2020, Robinhood Financial has a “revolving, committed and unsecured line
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`for $25.0 million with the Parent.” Annual Audited Report, at Note 6 (emphasis added).
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`87.
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`Robinhood Financial also has “an expense sharing agreement with the Parent,”
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`pursuant to which Robinhood Financial “reimburse[s] the Parent for payroll, technology,
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`information services, occupancy, and other expenses. The Parent also pays certain direct expenses
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`on [its] behalf and cash settles monthly with allocated expenses.” Id. As of December 31, 2020,
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`“the balance due to the Parent was $25.0 million,” and “the Parent contributed $20.0 million in
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`capital to [Robinhood Financial]” during 2020. Id. (emphasis added).
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`88.
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`According to Robinhood Securities’ Annual Audited Report filed with the SEC, as
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`sworn to under oath or affirmation by Kelati, as “CFO and Principal Financial Officer,” as of
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`December 31, 2020, Robinhood Securities has “six revolving and unsecured lines of credit with
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`the Parent for a total of $550.0 million.” See Annual Audited Report, at Note 9 (emphasis added).
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`89.
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`Robinhood Markets and its subsidiaries are treated as one entity for purposes of its
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`IPO Registration Statement. See Robinhood S-1, at F-9 (“The consolidated financial statements
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`include the accounts of RHM and its wholly-owned subsidiaries. All intercompany balances and
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`transactions have been eliminated.”) (emphasis added). Similarly, the S-1 describes Robinhood
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`Markets and its subsidiaries as comprising a “Vertically Integrated Platform,” that has enabled
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`them “to rapidly introduce new products and services . . . , while also supporting our ability to
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`quickly scale,