Hacker News Reader

Comment by newacct583 | Hacker News Reader

Counterpoint: virtually everyone who would have been buying GME yesterday based on the pump nonsense would have lost all that money. Consumer platforms can likewise be understood to have an obligation to protect their customers from scams, and to the extent they don't they can also be reasonably held liable.

Basically: there's a reason for these trading controls to exist. And I really think people here are getting ahead of their skis. Almost everyone screaming about sticking it to Melvin is, as I see it, a victim of a trading scam.

Melvin seems to have lost a lot of money, sure, but... so have all the WSB folks. Very, very few people are going to come out of this ahead (and realistically some of those are going to end up in jail).

View on HN

Counterpoint: You are assuming good faith behavior in RH, where I see blatant fraud. It is outright market manipulation that they stop people from buying, but not selling. That they stopped individuals like me, who know the risk and can afford the loss, while allowing their hedge fund buddies to buy the dump and cover shorts.

As for "this would have happened anyway", well that doesn't sound very free market to force the very thing you claim to be trying to stop. RH says "oh no we don't want you to lose money, so we're going to cause a crash on the stock. Feel free to sell".

It's rotten to the core.

If you know the risk, and can afford the loss, you can use a different platform, no?

This action is likely (at least partially) targeted to prevent new users who have never traded a stock from trying to hop on the train and follow a "How to buy GME Options to make BANK in 5 simple steps!" article from losing everything.

Do you think there would be less blow-back if Robinhood only restricted new accounts? Or maybe only people with minimum balances?

If they stopped allowing people to sell their existing positions, then a lawsuit about "Robinhood is holding my funds hostage, didn't let me sell, and now I lost money because of them" would have come in, and probably would have had a lot more merit.

We are working on fundamentally different assumptions. You assume they did this in good faith to "protect new users".

I believe they are committing fraud and stock manipulation.

But yes, if I used your assumption, I would say they should have restricted options for new users, or put extra warnings up.

And to your first sentence, no, you can't just move to a new platform. It takes more than a week to move funds from one brokerage to another.

> I believe they are committing fraud and stock manipulation.

The stock is already manipulated, though. No one racing to buy GME is doing so because a genuine desire to receive dividends, exercise voting power over corporate governance, etc... They're doing it because they read on wallstreetbets that a magical "short call" was coming tomorrow which would spike the stock.

That's a SCAM. It's not going to happen that way. The owners of all those early shorts have already settled their positions (and, yes, lost a lot of money in the process) and all you're seeing now is a tulip-style pump and dump.

You got scammed. You're not a hero. Robinhood might well not be acting in your best interests but they almost certainly saved you money.

You are factually incorrect.

The users on WSB used publicly available data to see that the shorting was occurring. They did what "the pros" constantly do, which is pool resources and make moves collectively. That is not "manipulation" in the legal form of the word. Not like shutting down trading, in one direction only, for retail only. Since it is individual users on a public forum winning, instead of the guild of hedge fund bros, the power player (Citadel) is forcing the shutdown.

Whether or not pumped up stocks are wise is irrelevant. The fact that something that happens constantly gets axed because the wrong people are winning is the issue.

Yes, I am 100% assuming that Robinhood is acting is "good faith" (the fact that I'm defending Robinhood feels gross to me).

If Robinhood just wanted to make money, they would have let this continue. People like to complain that RH gets payment for order flow, but they just knowingly cut off that order flow.

It feels like Occam's Razor should apply here. Either:

1. Robinhood felt that it's long term prospects were better if it's users weren't able to gamble and most likely lose all of their money, thus being scared away from the stock market forever.

2. There is a secret cobal that Robinhood, who was previous the "bad guy" of the financial world, is now in and tricked it's users into buying a stock that would be worthless just so that Robinhood could shut of trading at the peak, and let their secret hedge-fund buddies make a ton of money.

I'm not inclined to believe the conspiracy theory when there is a more more reasonable option.

The same firm, Citadel, that fills much of RH's orders is the firm that propped up Melvin Capital (the group that shorted GME and needed a bailout).

Option 3: The cabal is there, it isn't secret, and they were on the hook to lose so much money that it was cheaper to essentially sacrifice the RH brand than to let the short get fucked to infinity.

Edit: They have stated on a blog post that this was a risk management move on their part - not strictly in the interest of the customer.

The market is broken.

Good thing people can still buy on RH, in order to close their short positions, because guess what? They restricted opening of new positions, meaning that if you have no position, you cannot buy or sell. It is common, it is normal, several other brokerages took similar actions, and it is commonly done when it looks like something illegal might be happening.

From what I understand, they are allowing selling shares, just restricting purchasing shares. That is what makes this market manipulation. A market freeze would block all transactions.

They are allowing people to close positions they currently hold, but not open new positions. That is not the same as only allowing people to sell shares, and it is not the same as suspending trading of the security.

> "close positions they currently hold, but not open new positions. That is not the same as only allowing people to sell shares"

Since RH doesn't allow shorting, the only way to close a position is by selling shares. So yes, it is exactly the same as only allowing people to sell shares.

> Basically: there's a reason for these trading controls to exist.

There is a reason for trading controls by a neutral third party. Trading controls created and manipulated by a stakeholder is market manipulation and illegal.

> virtually everyone who would have been buying GME yesterday based on the pump nonsense would have lost all that money

That's not true. Today the stock went higher than at any point yesterday.

It's already below its open.

Edit: multiple responses seizing on what can only be called a conspiracy theory at this point that some how absent Robinhood's tiny trade volume this stock would somehow still be going up from a 500% increase.

Guys, YES, the system is kinda rigged. What happened here is that you all GOT SCAMMED. There is no magic short call coming tomorrow. The stock was pumped (starting originally with a short squeeze, but of course now it's just a regular bubble), and you were fooled into trying to buy it high. You are the victims here, not the heroes.

They’ll probably use that argument to justify their action. “See we saved you from yourself, look how low it got”. But who knows what would have happened if the trades weren’t stopped. The system is rigged.

Couldn't have anything to do with RH only allowing you to sell the stock, could it?

Yes, but it was higher.

Strange how only being allowed to sell and not buy may drive a price down.

That's true. Most people involved are driven by profit, not by screwing up hedge funds. Trading controls are important but it's problematic that Robinhood has this kind of power. That's usually something that exchanges control.

Reply on news.ycombinator.com