Horrible Bug in Robinhood App Enriches Traders with Excess Funds

| Updated
by Jeff Fawkes · 3 min read
Horrible Bug in Robinhood App Enriches Traders with Excess Funds
Photo: Shutterstock

The mobile application for trading shares called Robinhood has a dangerous exploit that allows traders to raise money out of thin air.

The Wall Street Bets, a Reddit branch dedicated to stock trading, is full of hot discussions around Robinhood. Traders were using the broken leverage system in the app to gain unbelievable profits. During his trade session, one of the traders had managed to turn $4,000 to one million thanks to the app’s code flaw that is still not fixed.

The glitch allowed several other traders to access large amounts of illusive margin. A trader wrote that he had gained access to $50,000 of the funds while buying the Apple stocks, then he lost the sum just like he earned it. The trader even made a video for YouTube featuring the process.

According to posts of the traders on Reddit, here’s how the thing works. First, you need to buy a Robinhood Gold subscription with $2,000, which will allow using extended margin funds. Then, you pick some stocks (AMD, Apple, Ford, GE, etc.) and buy them with margin. After that, the Call Contract should be sold, and the stocks must support low strike prices (like 2 dollars).

The wise traders then use the money to repurchase the shares, while margin doubles the earnings every time. The operation makes the trader’s capitals bigger, allowing him to repeat the scheme as many times as he wants.

The only problem with the money is that these are unlawful gains and in the end, you won’t be able to spend them. So, no way to cash out huge profits, according to the report by traders “theDrallen” and ”ControltheNarrative”:

“You don’t actually become a “millionaire” by doing this. This is Robinhood’s shitty risk management and you never realize these gains. You shouldn’t recreate this. That being said – we are on path for the 4th time Robinhood has to release a patch/implement new rules to their platform.”

Robinhood Team is Aware of the Bug, No Time for Comments 

Techcrunch had asked the RH representative via e-mail whether they are going to fix that issue, and they got a very short response showing that things are not so great in the back end:

“We’re aware of the isolated situations and communicating directly with customers.”

No matter what the company will do in the future, they already have gained a controversial reputation. According to their CEO Vlad Tenev, Robinhood aims to become a banking solution for any needs. Yet, considering the number of bugs that may or may not appear in the app, they first should go to their IT department. And check the software twice to make sure that the $912 million in venture funding that the U.S. based company initially received are spent rightly.

Robinhood Had Similar Issues in the Past

Back in December 2018, more than 850,000 users were signed up for their highly marketed product: a no-fee checking account with an interest of 3%. Twice more than any other similar venture can offer to its customers.

However, The Securities Investor Protection Company declared later that it wouldn’t be able to provide insurance services to Robinhood. All because the deal was not even discussed when the announcement was released. The offer appeared to fail the regulatory demands, and a second push by Robinhood was the 2% interest rate account offer. This time, the 2% accounts are backed by the Federal Deposit Insurance Corporation.

Business News, Editor's Choice, FinTech News, Market News, Mobile
Related Articles