Investing platform Robinhood, which is rapidly gaining popularity, appears to be making up for lost profits from zero commissions by selling users' data to make a quick buck at high-speed trading firms (HFTs) on Wall Street.
Company Robinhood Financial LLC, a US-based mobile stock brokerage company, allows you to trade both fiat and crypto assets with zero commission, without earning money on transactions, and indicates margin lending and interest as the main sources of income, accumulated from client account balances. But the company's filing with the SEC for the second quarter of this year shows millions in revenue from the sale of user data, including not only the contents of customer orders, but also contact information, demographic and investment data.
This is a serious violation of privacy for more than four million active users and an unprecedented act of deception by a company that emphasizes ethical trading practices for the benefit of everyday Americans, but turns out to profitably profit from everyone by selling personal information and forcing HFT on everyone individual trade.
Robinhood's website is replete with statements:
⁃ “Invest for free: We believe the financial system should work for all of us, not just the rich.”
⁃ “Trusted by millions in the USA: We take security seriously and use the latest technology to ensure complete privacy and confidentiality of your personal information.”
However, there is no word on the site about the possible sale of information. Brokerage firms are required by law to disclose these transactions to the SEC. Thanks to this report, this information surfaced. Moreover, simple mathematics shows that the scheme for selling user data to HFT traders can bring in about $500 million per quarter.
At the same time, this is not only a conflict of interests between business and users, but also a direct threat to the latter, since Robinhood does not choose the most reliable partners. Among the companies that partner with Robinhood, many have come to the attention of the SEC and been fined for violating trading rules. One such firm, Citadel Securities LLC, was fined $22 million in early 2017 for misleading clients about prices. Last fall, Robinhood client Wolverine Securities was fined $1 million for insider trading...
Robinhood has not yet made an official statement that would refute this information.
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