US lawmakers criticized broker application RobinHood on Thursday after it restricted users from trading stocks that were pushed to unprecedented high levels by individual retail investors.
The financial services company announced it is "restricting transactions for certain securities to position closing only," which included GameStop, BlackBerry, AMC and other stocks, because of "current market volatility."
For some time small-time investors have been analyzing underpriced securities on social media platforms such as a subReddit forum named WallStreetBets, which gained more than 2.4 million new subscribers in a week before it was banned Wednesday.
In a David vs. Goliath story, the retail investors with relatively smaller capital have put together resources for options and buy stocks they believed are too cheap and have taken long positions against large hedge funds in the Wall Street that have shorted the stocks betting on them to fail.
GameStop shares skyrocketed 1,100% in a week, while movie theater chain AMC Entertainment soared 584% and smartphone maker BlackBerry jumped 200% before they each dived 50% Thursday, but they managed to provide huge gains for investors.
One of the Wall Street large hedge funds, Melvin Capital, was forced Tuesday to close its short position on GameStop after taking huge losses.
"This is unacceptable," Democratic congresswoman Alexandria Ocasio-Cortez from New York wrote on Twitter about RobinHood restricting its user from trading.
"We now need to know more about @RobinhoodApp 's decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit. As a member of the Financial Services Cmte, I'd support a hearing if necessary," she said.
Republican Senator Ted Cruz from Texas, who is rarely on the same page with Ocasio-Cortez, responded: "Fully agree."
RobinHood, ironically named after English folk hero who took from the rich and gave to the poor, says in its mission statement the platform is "to provide everyone with access to the financial markets, not just the wealthy."
Another Republican Senator Marsha Blackburn of Tennessee wrote: "Free the traders on @RobinhoodApp."
"This is beyond absurd. @FSCDems need to have a hearing on Robinhood's market manipulation," Democratic congresswoman Rashida Tlaib of Michigan said on Twitter.
The first woman of Palestinian descent and one of the first two Muslim women elected to Congress, Tlaib continued: "They're blocking the ability to trade to protect Wall St. hedge funds, stealing millions of dollars from their users to protect people who've used the stock market as a casino for decades."
Twitter users also criticized RobinHood's decision by stating that free trade on so-called liberal financial markets is only allowed when it makes money for big Wall Street firms and investors, whereas small investors are held back when they try to get ahead.
Democratic congressman Ro Khanna from California, whose district is big tech's Silicon Valley, said on Twitter: "We're done letting hedge fund billionaires treat the stock market as their personal playground, then taking their ball home as soon as they lose."
"This entire episode has demonstrated the power of technology to democratize access to American financial institutions, ultimately giving far more people a say in our economic structures," he said.
Democratic Senator Elizabeth Warren of Massachusetts, one of the leading Democrats on financial regulation, blasted big investors.
"For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price," she wrote on Twitter.
"It's long past time for the SEC and other financial regulators to wake up and do their jobs-and with a new administration and Democrats running Congress, I intend to make sure they do," she added.
