Trading app Robinhood says facing US regulator inquiries

Stock trading app Robinhood has confirmed it is cooperating with inquiries from US regulators into its decision to temporarily throttle purchases of shares in companies such as GameStop during frenzied trading in January.

The free brokerage platform is facing inquiries from federal financial regulators, state attorneys general, and the US Congress, according to a filing with the Securities and Exchange Commission.

Robinhood, which says it is "cooperating" with the entities, is already facing dozens of class-action lawsuits.

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The lawsuits "generally allege breach of contract, breach of the implied covenant of good faith and fair dealing, negligence, breach of fiduciary duty and other common law claims," Robinhood said in the filing.

"We believe that the claims in these lawsuits are without merit and intend to defend against them vigorously."

Key players in the GameStop shares trading frenzy told skeptical US lawmakers last week that their actions were above board and in line with the ordinary stock market business.

Founders of Robinhood and the online forum Reddit were among those to testify at a House of Representatives financial services committee hearing.

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GameStop frenzy

Earlier in January, an army of amateur investors, many exchanging advice and opinions on a popular forum at the Reddit website, began buying up GameStop in defiance of hedge funds that had bet shares in the company would tank because the vide game disk selling company is out of synch with the Internet age.

Institutional investors seeing the David and Goliath battle taking place between amateurs and hedge funds move in to profit from market movements, adding to the volatility.

What began as dueling stock market bets came to represent ordinary people striving to claim some of the wealth horded by the financial elite.

US regulators began investigating practices of social media, hedge funds and trading platforms and whether brokerage platforms, including free trading app Robinhood, moved to protect financial professionals suffering huge losses as shares in GameStop rocketed.

After rocking the stock market at the end of January due to a speculative buying frenzy, shares in video game store chain GameStop were recently buzzing anew on Wall Street.

GameStop shares more than doubled in price on Wednesday, then rocketed further on Thursday in trading so heated that stock market operators tapped the brakes to cool the situation.

Trading driven by emotion or risk-taking rather than business fundamentals put the spotlight back on GameStop's wild ride, which has captured attention due to what some see as a battle between ordinary folks and titans of Wall Street.