Meme-Stock Probe Finds Robinhood Woes Were Worse Than It Let On

Bloomberg writes that the makers of the Robinhood app 'faced a more dire situation during the height of last year's meme-stock frenzy than executives at the online brokerage let on publicly, according to a report from top Democrats on a key congressional committee.'

A more-than-yearlong investigation by staff on the House Financial Services Committee concluded Friday that the frenzied trading in GameStop Corp. and AMC Entertainment Holdings Inc. posed a significant threat to the online brokerage. Robinhood avoided defaulting on its regulatory collateral obligations in late January 2021 only because it received a waiver from its clearinghouse, according to the findings... 'The company was only saved from defaulting on its daily collateral deposit requirement by a discretionary and unexplained waiver,' according to the report. 'Robinhood's risk-management processes did not work well to predict and avert the risk of default that materialized....'

The 138-page document released on Friday provides the most detailed look yet at how alarmed Robinhood executives grew over the situation in late January 2021. According to the findings, those actions didn't match the firm's public assertions.

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