Robinhood revolutionized retail investing with its commission-free trading platform, but this innovation came with significant costs for many investors. From catastrophic system outages that prevented trading during critical market moments to trading restrictions during the 2021 meme stock frenzy, millions of Robinhood customers have suffered substantial financial losses. If you lost money due to Robinhood’s misconduct, platform failures, or regulatory violations, you may be entitled to recover your investment losses through FINRA arbitration.
Key Takeaways
- Robinhood has paid over $200 million in regulatory penalties since 2020 for violations that harmed investors
- Common claims include system outages, meme stock trading restrictions, options trading losses, and account security breaches
- FINRA arbitration is the required method for recovering losses from Robinhood
- You have six years from the date of the violation to file an arbitration claim
- An experienced securities attorney can evaluate your case during a free consultation
Robinhood’s History of Regulatory Violations
Robinhood’s regulatory track record reveals a pattern of violations that have directly harmed investors. Understanding this history helps demonstrate that investor losses were not simply the result of market conditions, but stemmed from the company’s failure to meet its legal obligations to customers.
2025 SEC Enforcement Action
In January 2025, the Securities and Exchange Commission announced that Robinhood Securities LLC and Robinhood Financial LLC agreed to pay $45 million in combined civil penalties for a broad range of securities law violations. According to the SEC press release, the violations included:
- Failing to accurately report trading activity
- Violating short sale rules under Regulation SHO from May 2019 through December 2023
- Submitting late suspicious activity reports
- Failing to maintain proper books and records
- Failing to safeguard customer information, leading to a November 2021 cybersecurity breach that exposed data on millions of customers
2025 FINRA Enforcement Action
In March 2025, FINRA ordered Robinhood to pay $3.75 million in customer restitution and $26 million in fines. The FINRA enforcement action cited numerous violations including:
- Anti-money laundering program failures that caused the firms to miss suspicious activity
- Customer identification failures resulting in thousands of improperly opened accounts
- Inaccurate disclosures about market order handling practices
- Inadequate supervision of clearing system technology
- Insufficient oversight of paid influencer marketing communications
Why Regulatory Actions Matter for Your Claim
Regulatory findings by FINRA and the SEC can serve as powerful evidence in arbitration. When regulators have already determined that Robinhood violated securities laws, your attorney can use these findings to support your individual claim for damages.
2021 Record FINRA Penalty
In June 2021, FINRA levied what was then its largest-ever financial penalty against a member firm. Robinhood paid $70 million, including $57 million in fines and $12.6 million in restitution. According to FINRA, the violations included providing false or misleading information to customers, experiencing system outages that prevented trading, and approving customers for options trading when it was not appropriate.
| Year | Regulator | Penalty | Key Violations |
|---|---|---|---|
| 2025 | SEC | $45 million | Reporting failures, Reg SHO violations, cybersecurity |
| 2025 | FINRA | $29.75 million | AML failures, disclosure issues, supervision |
| 2024 | Massachusetts | $7.5 million | Gamification, unsuitable options approvals |
| 2021 | FINRA | $70 million | System outages, false information, options issues |
| 2020 | SEC | $65 million | Failure to disclose payment for order flow |
Types of Robinhood Investment Loss Claims
Investors have filed claims against Robinhood for various types of misconduct and platform failures. Each type of claim has specific elements that must be proven to recover damages through FINRA arbitration.
Platform Outage Claims
Robinhood’s platform has experienced multiple catastrophic outages during periods of extreme market volatility. When the platform fails, investors cannot execute trades to protect their portfolios or capitalize on market opportunities.
- March 2, 2020: Full-day outage during historic market rally
- March 9, 2020: Outage as Dow dropped 2,000 points
- January 2021: System latency during meme stock surge
Trading Restriction Claims
During the January 2021 meme stock frenzy, Robinhood restricted purchasing of GameStop, AMC, and other securities. Investors who were prevented from buying watched as stocks they wanted to purchase soared in value.
- January 28-February 4, 2021 restrictions
- GameStop dropped 80% after restrictions imposed
- 34+ class action lawsuits filed
Options Trading Claims
Robinhood approved many customers for options trading despite having limited or no investment experience. These complex, high-risk products led to devastating losses for unsuitable investors.
- 68% of Massachusetts options traders had limited experience
- Gamification features encouraged frequent trading
- Inadequate risk disclosure
Account Security Claims
Hackers have gained unauthorized access to Robinhood accounts, stealing funds and customer information. The November 2021 data breach exposed information on millions of customers.
- Account takeovers and unauthorized trades
- Crypto theft from compromised accounts
- Identity theft from data breaches
The March 2020 Platform Outages
On March 2, 2020, Robinhood suffered a complete system-wide outage that lasted an entire trading day. This outage occurred during what became the biggest one-day point gain in Dow Jones Industrial Average history. Investors could not buy stocks as the market surged, missing significant profit opportunities.
One week later, on March 9, 2020, the platform failed again during one of the most volatile trading days in history. The Dow plunged 2,000 points, the S&P 500 fell 7.6%, and the Nasdaq dropped 7.3% amid the COVID-19 market crash. Investors who needed to sell positions to limit losses were completely locked out of their accounts.
FINRA later found that these outages affected as many as 12.5 million account holders. The regulator noted that Robinhood’s contingency plan only addressed physical disruptions, not technological failures. This planning failure directly contributed to investors losing tens of thousands, and in some cases hundreds of thousands, of dollars.
Following these outages, Robinhood agreed to a $9.9 million class action settlement. However, class action settlements typically provide minimal recovery for individual investors. Many affected customers may have valid claims for additional damages through FINRA arbitration.
Important: Class Action Settlements vs. Individual Claims
Class action settlements often provide only pennies on the dollar for investor losses. If you suffered significant losses from Robinhood’s platform outages, you may be able to recover substantially more through individual FINRA arbitration. However, participating in a class action settlement may affect your right to file an individual claim.
The January 2021 Meme Stock Trading Restrictions
In January 2021, retail investors coordinating on social media platforms drove massive price increases in GameStop, AMC Entertainment, and other heavily shorted stocks. GameStop’s share price rose from $17.25 at the beginning of January to an intraday high of $483 on January 28, 2021.
On January 28, 2021, Robinhood abruptly restricted customers from purchasing shares in these securities. The restrictions lasted until February 4, 2021. During this period, prices collapsed as buying pressure was artificially removed from the market. GameStop lost more than 80% of its value from its peak.
Robinhood stated the restrictions were necessary due to increased clearinghouse deposit requirements. However, investors who could not purchase shares during the run-up, or who were locked out of selling at peak prices, suffered significant losses.
Legal Actions from the Trading Restrictions
The trading restrictions sparked immediate backlash. More than 34 class action lawsuits were filed against Robinhood. Politicians from across the political spectrum, including Senator Ted Cruz and Representative Alexandria Ocasio-Cortez, criticized the company’s actions.
In 2022, attorney August M. Iorio secured the nation’s first FINRA arbitration award against Robinhood for the January 2021 trading restrictions. The investor, Jose Batista, was awarded approximately $30,000. This precedent demonstrates that individual investors can successfully recover losses through FINRA arbitration even when class action lawsuits are dismissed.
While federal courts have largely dismissed class action claims related to the meme stock restrictions, individual arbitration claims continue to succeed. This is because arbitration panels evaluate each case on its individual merits, without the procedural hurdles that affect class actions.
Gamification and Unsuitable Options Trading
In January 2024, Robinhood agreed to pay $7.5 million to Massachusetts securities regulators to resolve allegations that the company used game-like features to encourage inexperienced investors to make risky trades.
According to the Massachusetts complaint, Robinhood employed various gamification tactics including:
- Confetti animations celebrating trades
- Digital scratch tickets revealing free stock rewards
- Push notifications encouraging trading activity
- Lists of popular stocks designed to influence purchases
- Lottery-style finger swiping to reveal prizes
The complaint alleged that these tactics led many customers with no investment experience to average at least five trades per day. More concerning, the Massachusetts Securities Division found that 68% of the company’s Massachusetts customers approved for options trading had limited or no investment experience.
Options are complex financial instruments that can result in losses exceeding the original investment. Approving inexperienced investors for options trading without proper suitability analysis violates FINRA rules and can form the basis for an investment fraud claim.
The Alex Kearns Tragedy
The dangers of approving inexperienced investors for complex options strategies became tragically clear in June 2020 when college student Alex Kearns died by suicide. Kearns believed he owed nearly $730,000 due to a complicated options trade on Robinhood, though the displayed balance did not reflect his actual liability.
Following this tragedy, Robinhood made changes to its options approval process and information display. However, the incident highlighted systemic problems with how the platform approved and educated users about high-risk trading strategies.
How to Recover Your Robinhood Investment Losses
If you suffered losses due to Robinhood’s misconduct, you can pursue recovery through FINRA arbitration with the help of an experienced securities litigation attorney. When you opened your Robinhood account, you agreed to resolve disputes through arbitration rather than court litigation. While this prevents you from filing a traditional lawsuit, FINRA arbitration offers several advantages.
Faster Resolution
FINRA arbitration cases typically resolve within 12-18 months, significantly faster than court litigation which can take years.
Lower Costs
Arbitration generally costs less than traditional litigation, with simplified procedures and limited discovery.
Expert Arbitrators
Cases are decided by arbitrators with securities industry expertise who understand complex trading issues.
The FINRA Arbitration Process
FINRA arbitration follows a structured process designed to efficiently resolve investor disputes:
Step 1: Case Evaluation
An experienced securities attorney reviews your account records, trading history, and communications to identify specific instances of misconduct and calculate your losses.
Step 2: Filing the Claim
Your attorney prepares and files a Statement of Claim with FINRA, detailing the facts, Robinhood’s alleged violations, and the damages you seek to recover.
Step 3: Robinhood’s Response
Robinhood has 45 days to respond to your claim by submitting an Answer that may deny allegations or assert defenses.
Step 4: Arbitrator Selection
Both parties participate in selecting neutral arbitrators from FINRA’s roster of over 8,000 qualified arbitrators using a strike and rank system.
Step 5: Discovery and Hearing
Parties exchange relevant documents and may take depositions. A hearing is held where both sides present evidence and testimony.
Step 6: Award
The arbitration panel issues a final, binding award. If you prevail, Robinhood must pay the award within 30 days.
What Damages Can You Recover?
Through FINRA arbitration, you may be entitled to recover various types of damages depending on your specific situation:
| Damage Type | Description |
|---|---|
| Compensatory Damages | Recovery of actual investment losses caused by Robinhood’s misconduct |
| Lost Profits | Gains you would have realized but for the misconduct (e.g., if you could have sold during an outage) |
| Consequential Damages | Tax liabilities, margin interest, and other costs resulting from the misconduct |
| Attorney Fees | In some cases, the arbitration panel may award legal fees and costs |
| Punitive Damages | Available in cases of particularly egregious misconduct to punish the wrongdoer |
Time Limits for Filing Your Claim
FINRA arbitration claims must be filed within six years from the date the violation occurred. This means if you suffered losses from the March 2020 platform outages, the deadline to file your claim is approaching in March 2026.
Do not delay in seeking legal consultation. The statute of limitations is strictly enforced, and once it expires, you lose your right to recover damages regardless of the strength of your claim. Additionally, the sooner you act, the easier it is to gather evidence and document your losses.
Why Gary Varnavides Can Help
Recovering investment losses from a major brokerage firm requires an attorney who understands how these companies operate and defend themselves. Gary Varnavides brings a unique perspective to investor claims: before representing investors, he spent 10 years at Sichenzia Ross Ference LLP defending broker-dealers in securities arbitration.
This experience on the defense side means Gary knows the strategies Robinhood will use to fight your claim. He understands their internal procedures, compliance systems, and the defenses they rely on to avoid liability. This insider knowledge is invaluable when building a case to recover your losses.
Credentials
- Super Lawyers Rising Star, 2015-2023
- Top 2.5% of attorneys in NY Metro area
- Licensed in California and New York
- Founded Varnavides Law, PC
Approach
- Thorough case evaluation and loss calculation
- Aggressive pursuit of maximum recovery
- Clear communication throughout the process
- Experience against major brokerages
Fee Structure
We handle most Robinhood investment loss cases on a contingency fee basis:
What this means:
- No upfront attorney fees
- We only get paid if we recover money for you
- Fee percentage discussed during your free consultation
Case costs:
You remain responsible for case costs, which may include filing fees, expert witnesses, and deposition transcripts. We can discuss cost estimates and payment arrangements during your consultation.
Frequently Asked Questions
Can I sue Robinhood in court for my investment losses?
No. When you opened your Robinhood account, you signed a customer agreement containing a mandatory arbitration clause. This means all disputes must be resolved through FINRA arbitration rather than court litigation. However, FINRA arbitration can be an effective way to recover losses, often resolving faster than court cases.
How much can I recover through FINRA arbitration?
The amount you can recover depends on your specific losses and the circumstances of your claim. You may be entitled to compensatory damages for actual losses, lost profits, consequential damages, and in cases of egregious misconduct, punitive damages. An attorney can evaluate your case and estimate potential recovery during a free consultation.
What is the deadline to file a claim against Robinhood?
FINRA arbitration claims must be filed within six years from the date the violation occurred. For example, if you lost money during the March 2020 platform outages, you must file your claim by March 2026. Do not delay in consulting an attorney, as the deadline is strictly enforced.
I already received money from a class action settlement. Can I still file an individual claim?
This depends on the terms of the class action settlement you participated in. Some settlements require you to waive your right to pursue individual claims. An attorney can review the settlement documents to determine if you retain the right to file an arbitration claim for additional damages.
What evidence do I need to file a claim?
Helpful evidence includes account statements, trade confirmations, screenshots of error messages or outages, communications with Robinhood customer service, and any documentation of the losses you suffered. An attorney can help gather additional evidence during the arbitration process.
How long does FINRA arbitration take?
FINRA arbitration cases typically resolve within 12-18 months from filing to award. This is significantly faster than court litigation, which can take several years. The exact timeline depends on the complexity of your case and scheduling of hearings.
Do I have to attend an arbitration hearing?
Yes, you will likely need to testify at an arbitration hearing, either in person or via video conference. The hearing is similar to a trial, where your attorney presents evidence and arguments on your behalf. Arbitrators may ask you questions about your account and losses.
What types of losses qualify for arbitration claims against Robinhood?
You may have a valid claim if you suffered losses from platform outages that prevented trading, trading restrictions during the meme stock frenzy, unauthorized account access, unsuitable options trading recommendations, or misleading information about order execution. Contact an attorney to evaluate whether your specific losses qualify.
Take Action to Recover Your Losses
Robinhood’s pattern of regulatory violations and platform failures has cost investors millions of dollars. If you suffered Robinhood investment losses due to system outages, trading restrictions, options trading, or account security issues, you have the right to seek recovery through FINRA arbitration.
Time limits apply to your claim. The sooner you act, the stronger your case will be. Contact Varnavides Law today for a free consultation to discuss your situation and learn how we can help you recover what you have lost.
Free Case Evaluation
Lost money investing through Robinhood? Contact us today to discuss your legal options and find out if you have a valid claim for FINRA arbitration.
Prior results do not guarantee a similar outcome. This page is for informational purposes only and does not constitute legal advice. No attorney-client relationship is created by viewing this content.
