Robinhood – Trading Restrictions

Robinhood Trading Restriction Lawsuit | GME & AMC Investor Representation

Were you among the countless retail investors caught off guard by Robinhood’s sudden trading restrictions in January 2021? If you held positions in “meme stocks” like GameStop (GME), AMC Entertainment Holdings (AMC), BlackBerry (BB), Bed Bath & Beyond (BBBY), Nokia (NOK), Koss Corp (KOSS), or Express Inc. (EXPR), and suffered significant losses when Robinhood removed the “buy button,” you may have legal options to recover your investments.

As a leading securities arbitration attorney, August M. Iorio of Iorio Law PLLC has been at the forefront of holding Robinhood accountable. In 2022, Mr. Iorio secured the nation’s first FINRA arbitration award against Robinhood for these controversial restrictions, paving the way for other investors to seek justice.

Today, Iorio Law PLLC represents dozens of retail investors nationwide who collectively lost tens of millions due to Robinhood’s actions. If Robinhood’s “Position Closing Only” (PCO) restrictions disrupted your trading strategy and caused financial harm, contact us for a free, confidential consultation to explore recovery options through securities arbitration.

We represent investors nationwide on a contingency-fee basis—you owe us nothing unless we recover money for you.

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Landmark Victory: Holding Robinhood Liable

Iorio Law founder August M. Iorio achieved a groundbreaking victory for a retail investor against Robinhood.

• The Client: A 27-year-old truck driver who suffered substantial losses when Robinhood blocked purchases of KOSS and EXPR shares.
• The Finding: A FINRA arbitrator found Robinhood liable for the investor’s losses.
• The Result: Mr. Iorio’s client was awarded compensatory damages and interest, with Robinhood ordered to pay all forum fees.

This historic win (FINRA Case No. 21-01206) proves that investors can successfully fight back and recover their losses.

Why Did Robinhood Impose Trading Restrictions on Meme Stocks in January 2021? Our Ongoing Investigation

Robinhood publicly blamed “market volatility”, but the evidence shows a different story.

On January 28, 2021, Robinhood shocked its users by designating several high-volatility stocks—including GME, AMC, BB, BBBY, NOK, KOSS, and EXPR—as “position closing only” (“PCO”) without prior notice. This meant customers could only sell existing positions, not buy more, effectively cutting off access to these markets during a pivotal moment.

Our investigation at Iorio Law PLLC reveals that Robinhood’s restrictions stemmed from internal failures rather than mere market volatility. The firm was undercapitalized and unprepared for the surge in trading volume, leading to a liquidity crisis. Specifically:

• Robinhood lacked the scalability and capital to handle its business model amid heightened volatility.
• It failed to meet collateral deposit requirements from the National Securities Clearing Corporation (NSCC), prompting restrictions to protect the firm’s own interests ahead of its planned IPO.
• Post-restriction, Robinhood issued conflicting and misleading public statements to downplay the crisis, further eroding investor trust.

These actions not only manipulated stock prices—causing immediate declines in GME, AMC, and other meme stocks—but also violated core duties of fair dealing and best execution under FINRA rules. Investors traded in an unfair market, resulting in widespread damages to equity shares and options contracts.

For instance, GME’s pre-market price plummeted after the PCO announcement, wiping out value for call option holders. Similar patterns affected AMC, BB, BBBY, NOK, KOSS, and EXPR, as the restrictions created artificial downward pressure.

A 2022 report from the U.S. House Financial Services Committee confirmed that Robinhood’s restrictions were a direct result of its own internal failures.

Key Findings from the U.S. House Financial Services Committee Report

The events triggered a congressional probe, culminating in a June 2022 report by the House Financial Services Committee. Titled “Game Stopped: How the Meme Stock Market Event Exposed Troubling Business Practices, Inadequate Risk Management, and the Need for Legislative and Regulatory Reform,” the report exposed Robinhood’s shortcomings and validated investor claims. Notable conclusions include:

• Inadequate Preparation for Regulatory Obligations: Robinhood was not ready to meet NSCC capital requirements on January 28, 2021, forcing trading limits that barred customers from market participation.
• Internal Liquidity Crisis: The trading restrictions were implemented for Robinhood’s own benefit because the firm lacked the capital to meet its clearinghouse deposit requirements with the NSCC.
• Inadequate and Flawed Risk Management: The firm ignored FINRA’s advice to adopt conservative stress testing and relied on incomplete models that overlooked Excess Capital Premium charges.
• Prioritization of Growth Over Stability: Internal communications showed hesitation in modeling volatility as early as January 24, 2021, while focusing on expansion despite operational strains.
• Misleading the Public: Robinhood employees sought to conceal the true reasons for the restrictions and made false and misleading public statements about the company’s financial stability.
• Broader Restrictions Than Peers: Unlike other brokers, Robinhood’s limits were more extensive and prolonged, exacerbating market impacts.
• Lack of Awareness: Employees demonstrated poor understanding of NSCC formulas, and the firm concealed restriction motives to prevent public panic.

These findings contradict Robinhood’s “market volatility” narrative and affirm that the restrictions were a symptom of deeper failures in capitalization, liquidity planning, and compliance. Instead, they strengthen claims of market manipulation under federal and state laws.

Robinhood’s actions placed downward pressure on the affected stocks, manipulating prices and causing retail investors to trade in an unfair market, leading to massive losses.

At Iorio Law PLLC, we leverage this report and our expertise to build strong FINRA arbitration cases, ensuring brokerage firms like Robinhood uphold their obligations to provide fair access, best execution, and ethical practices—even in volatile markets.

Frequently Asked Questions (FAQ)

Q: Why should I choose Iorio Law for my Robinhood claim?

A: Our firm is led by attorney August M. Iorio, who secured the first FINRA arbitration award for a retail investor against Robinhood for the January 2021 trading restrictions. We have already navigated this complex legal battle and won. We currently represent dozens of investors with tens of millions of dollars in damages.

Q: How much does it cost to file a claim?

A: There are no out-of-pocket fees or costs to you. We handle these cases on a contingency fee basis, which means we only get paid if we successfully recover money for you.

Q: What if I sold my shares for a loss? Can I still have a case?

A: Yes. Many of our clients suffered damages because the restrictions artificially drove down share prices, forcing them to sell at a loss in a market that was manipulated. We encourage any current or former Robinhood customers who held these stocks before January 28, 2021, to contact us.

Take the First Step to Recover Your Losses

You are not just another number. You are an investor whose rights were violated by a firm that prioritized its own stability over its duty to you. Iorio Law PLLC  has a proven record of helping investors recover nearly $100 million in over 700 cases.

Let us put our experience to work for you. Contact us today for a 100% free and confidential consultation to discuss your legal options.

• 📞 Call Now: (646) 330-4624
• 📧 Email: info@iorio.law
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About Iorio Law PLLC

Iorio Law PLLC is a national securities litigation law firm based in New York, NY. The law firm pursues FINRA arbitration claims nationwide on behalf of investors and investment traders to recover financial losses resulting from wrongful conduct by financial advisors and brokerage firms.

📍 Based in New York. Representing Investors Nationwide.