Arb’s win over Robinhood to stop meme stock trading could provide a roadmap

An investor’s victory over Robinhood last week in a Finra arbitration case involving the stock trading halt even last year could provide a roadmap for future claims, although experts warn that ‘It is too early to tell.

Nearly a year ago, Robinhood restricted trading in certain stocks due to unprecedented volume during a trading frenzy involving GameStop and other short stocks. Since, several investors filed complaints against the online brokerage in the arbitration system of the Financial Industry Regulatory Authority Inc. for losses related to the interruption of transactions.

Robinhood had an unbeaten record on such claims until Jose Batista, a 27-year-old truck driver, prevailed on January 6. A Finra sole arbitrator ordered Robinhood to pay Batista $29,460.77 in compensatory damages.

Batista argued that when Robinhood banned the purchase of shares of certain publicly traded companies on January 28, 2021, it caused the value of those shares to plummet, including Koss and Exper, which Batista held.

“We were thrilled for Mr. Batista and his family that the referee really got it right,” said August Iorio, a partner at Iorio Altamirano who represented Batista. “We believe this is a game-changing victory in the industry, and we look forward to seeing more.”

When price news released earlier this week, Iorio’s phone began buzzing with inquiries from aggrieved investors. He said he received more than 100 calls on Tuesday.

“Now there is overwhelming interest,” Iorio said.

A Robinhood spokesperson declined to comment.

Arbitration candidates shouldn’t get too excited about their chances of winning, experts said. In the Finra arbitration system, individual decisions do not create precedent and there is no case law to guide arbitrators.

“It’s still early days,” said Christine Lazaro, a professor at St. John’s University School of Law and director of its Securities Arbitration Clinic. “It is difficult to predict future outcomes based on a single decision.”

Batista’s win isn’t necessarily a harbinger of more wins for Robinhood investors because their claims may be different from his, said Chicago securities attorney Andrew Stoltmann.

“Each of these cases is so specific to the facts that you can’t read too much into them,” Stoltmann said.


Iorio’s winning approach may be a strategy adopted in other claims against Robinhood. He said the key was take a conservative approach and following where the process of discovery led. The case included two hearings.

Rather than trying to prove that Robinhood halted trading in some sort of collusion with a third party, Iorio argued that it used faulty liquidity and risk management prior to the trading halt. He was unprepared for the volatility that hit last January and caused major losses for investors.

“These online brokers have a responsibility to investors beyond providing the [trading] platform,” Iorio said.

Stoltmann said it would be difficult to prove Robinhood was involved in a trade restrictions conspiracy.

“It may look good on paper, but there is an evidentiary issue,” he said.


Trade restriction cases pose challenges because they are not typical suitability disputes.

“It’s a tough claim to articulate,” Lazaro said. “It’s not a claim referees typically see.”

Iorio cited causes of action often found in Finra arbitration claims, such as breach of contract, breach of fiduciary duty and unjust enrichment.

“It helps when an attorney can frame the claim using language that arbitrators will be familiar with in other types of securities cases,” Lazaro said.

Most of the investors who lost their claims against Robinhood were self-represented, but three were represented by Nathan C. Volheim. Volheim did not respond to a request for comment.

Batista’s request was heard under the special procedure option for simplified cases. It could take a year before the bigger ones are decided, Lazaro said.

Robinhood might fare better in these cases. Or maybe Batista paved the way for investor success.

“The more cases there are to hear, the clearer the playbook will become on how to beat them like a pinata,” Stoltmann said. “Robinhood must be careful not to sprain their wrist patting their back for their first wins.”

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