Reddit users reported an anomaly in the application of the American platform for trading stocks and crypto assets Robinhood, which allowed customers to borrow huge amounts.
The recent crash in Robinhood’s stock trading app allowed users to abuse the margin trading function and borrow up to $ 1.7 million, with no more than $ 2,000 in their account. The leverage used by some traders was actually more than 800x, which is many times higher than the opportunities usually offered by exchanges.
The news about the error spread quite quickly on the Internet, one of the first to notice an anomaly
Reddit users. One of them said that he was able to use margin trading to buy 100 shares of AMD, having only $ 3800.
After that, he sold the purchased shares and returned the money, and then, taking into account the profit already gained, he bought even more shares of AMD. He repeated this process over and over and used margin trading to maximize profits.
Since the legality of such trade is in question, we can expect a reaction from the creators of the application and regulators. Users who have abused the failure will most likely not be able to cash out, as transfers usually take a couple of days. It is not yet clear how the company will get out of this situation.
Recall that the American platform for trading stocks and crypto assets Robinhood received
licensed by the UK Financial Supervision Authority (FCA) to operate in the country in August. And in July, Robinhood announced
about the completion of the next round of financing, in the framework of which it received $ 323 million. The total capitalization of the company reached $ 7.6 billion.