[seffignoz]

(I also posted this on /r/wallstreetbets)

CLEARLY, Robinhood knows about the infinite leverage bug, they have the capital, resources and engineers to fix it in a day if they want.

Why are they not doing it? Are they stupid or what? Let's think about it for a second.

There are two possible outcomes here:

Let's say you do some leverage, and then use that leverage to lose 100k+, they can eat the loss briefly, and then they use collection agents to collect YOUR money. Robinhood will recoup the 100k$

You use the same leverage to gain 100k+, then, when you go to cash out to your bank, their audit team blocks the payment, saying that you "Violated the Terms of Service", by using a bug to make that amount of money. Thus, robinhood pockets 100k$. You can't sue them to get that money back, because you violated their TOS.

If I was Robinhood CEO, that's what I would do, a 100% legal, safe way to get rich quickly.

Prove me wrong.

[compiler-guy]

OK then:

Outcome 1: "they use collection agents to collect YOUR money. Robinhood will recoup the 100k$"

Only if the loser has $100k. Which they probably don't. Also, this ignores collection costs against people who do.

Outcome 2: You have a lawsuit from someone dealing with the TOS.

You also forgot Outcome 3: The SEC comes calling and fines you far more than $100,000 for allowing margin to unqualified investors.

[rbavocadotree]

What you've described is a very quick way to lose your broker dealers license, and get in massive shit from multiple federal agencies, not a safe way to get rich.

> CLEARLY, Robinhood knows about the infinite leverage bug

This is the same company that offered FDIC insured savings and checking accounts, while not actually being covered by FDIC. They have always taken a move fast a break things approach, and then had to cover their asses when regulators step in.

[chipsa]

SIPC insured.

[itake]

> they use collection agents to collect YOUR money

These users do not have the assets anywhere to cover these debts. The best RH could do is negotiate a lower terms and hope they just don't file bankruptcy. That $100k is really worth closer to $0k when the person you lent the money to has no assets and no income.

[ajross]

> CLEARLY, Robinhood knows about the infinite leverage bug, they have the capital, resources and engineers to fix it in a day if they want.

Not in all cases. Not all leverage is visible to them (though hiding it can certainly constitute fraud on the part of their customers). It's not possible to look at ownership of a security and conclude without error that the owner hasn't leveraged it in some other way.

I think the bigger question is whether or not Robinhood's bug constitutes an actionable enforcement action by the SEC. There are rules about how this stuff is supposed to be accounted, and I'm absolutely certain they're in violation of a bunch of them. A fine is probably the median expectation, but I wouldn't be shocked to see them fold entirely. Hell I wouldn't be shocked to see someone there end up in jail when this is all done.

[nradov]

The Robinhood CEO Baiju Bhatt actually is stupid. Just a complete idiot who somehow managed to trick naive investors into giving him money. For proof see how badly he bungled the introduction of checking / savings accounts and lied to customers.

https://www.usatoday.com/story/money/2018/12/14/robinhood-ch...

[webninja]

You sure have an axe to grind

[dwoozle]

Outcome 3 is that the SEC revokes your broker-dealer license for violation of Regulation T and your entire company disappears into a puff of smoke. You become one more company “disappeared” by the law, like Accenture or Aereo.

[egdod]

I’m guessing most of the 16 year old kids on r/wallstreetbets are functionally judgment-proof.

[kbar13]

nice business plan why dont you launch a startup with that idea prove me wrong send tweet