Chicago-based Stoltmann Law Offices is investigating incidences of investors whose brokerage accounts have been hacked. Market regulators are investigating reports that customers of the popular online trading app Robinhood were ripped off. Hackers reportedly obtained account information of Robinhood customers, then transferred funds out of their accounts. The customers have contacted the U.S. Securities and Exchange Commission and FINRA, the securities industry regulator, to probe the thefts.
How safe is your money in an online brokerage account? It should be protected by numerous safeguards, although lately cyberthieves have found a way to steal money directly from investors. During the COVID pandemic, online trading soared, with millions of day traders using their phones and other devices to trade stocks and other securities. But as a recent wave of customer complaints suggest, their accounts have been hacked and money taken from their accounts, according to Bloomberg News.
In a statement to Bloomberg, Robinhood did not take responsibility for the thefts:
“A limited number of customers appear to have had their Robinhood account targeted by cyber criminals because of their personal email account (that which is associated with their Robinhood account) being compromised outside of Robinhood,” a spokesman for the company stated in an email. “We’re actively working with those impacted to secure their accounts.”
According to five Robinhood customers, “who altogether lost close to $20,000 in liquidated stocks, the company isn’t only acting far too slowly to keep this sort of fraud from happening, but also seems to willingly discourage those who were hacked from reaching out at all,” reported Gizmodo.com.
In addition to online trading, popular with younger investors, Robinhood recommends specific stocks, many of them highly speculative. That often leads to money-losing trades. Nevertheless, the service has become one of the fastest-growing online brokers in the world, adding some 3 million new accounts in the first quarter of 2020 alone. The platform also pitches ultra-high risk penny stocks, which generally sell for a dollars a share – or less – but often have questionable or sketchy finances.
“Many Robinhood investors are willing to take on high risks in exchange for high rewards in the short term,” reports David Jagielski in Fool.com. “Hundreds of thousands of investors on the platform are gambling and betting on insolvent companies in the hopes that their stocks will rise in value.”
“And of course, in the short term, anything can happen,” Jagielski adds. “The problem is that if you’re caught holding on to the stock of an insolvent business and there’s a market crash, you could find yourself with no option but to sell it for a steep loss.”
Have you invested with brokers who have not protected your accounts or have ignored your risk tolerance? FINRA and the SEC have strict rules on disclosing risk profiles on all investments sold by brokers and investment advisers. If they fail to fully inform you of downside risk, you may have a case in arbitration. They also have to protect money you have in your accounts.
Firms are also legally required by FINRA to monitor and supervise what their brokers are selling – their investments must be vetted and authorized by the firms – and have an obligation to investors to fully reveal true risk and return information about the vehicles sold. Investors can file FINRA arbitration complaints if these rules are broken.
The Stoltmann Law Offices has represented investors in cases against securities brokers and has been investigating and filing arbitration complaints for investors who have been fleeced. If you invested with a broker-advisor and lost money as a result, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!