Robinhood pfof9/28/2023 In December 2020, the SEC (America’s financial markets regulator) fined Robinhood $65 million for “misleading customers about revenue sources and failing to satisfy duty of best execution”. However, these claims don’t hold up to close scrutiny. Their founders made proud claims that “we believe the financial system should be built to work for everyone”, and “we didn’t build Robinhood to make the rich people richer”. ![]() The chart below from FT and Pitchbook captures Robinhood’s meteoric rise:Īll was green and all was good for Robinhood and the merry men. ![]() The company now boasts more than 13 million customers, 1,200 employees, and a valuation of $11 billion after raising funds in August 2020. In 2013, Vlad and Baiju decided to strike off on their own and launched Robinhood - an online platform that allowed investors to trade stocks, ETFs, and other financial assets without paying trading commissions.Īt the time, competing brokers were charging $5 to $10 per trade, so Robinhood’s free model helped them to win the trust of millions of customers across America.įueled by crisp marketing, simple user interfaces, and their no-fee model, Robinhood grew by leaps and bounds over the next few years. Robinhood’s co-founders Vlad Tenev and Baiju Bhatt were roommates at Stanford, and set off after graduation to work in New York, building trading software for hedge funds (note to reader: this is one of many ties to the hedge fund world that we’ll come across). The ongoing GameStop ($GME) saga - where Robinhood conveniently ends up siding with the hedge funds, to the detriment of everyday investors around the globe.The opaque world of “payment for order flow”, and how this creates massive conflicts of interest for Robinhood.A run-down of Robinhood’s business model, and how they were fined $65 million for failing to disclose that most of their revenues come from Wall Street partners.So buckle up - we’re heading off to the moon □□! But first, let’s pause for a glance at: ![]() This is a story about Robinhood, an online broker that promised to “democratize finance for all”, but ended up deceiving its customers and helping the rich get richer. How Robinhood Misled the Poor and Rewarded the Rich
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