The company filed notice of the pending settlement with a federal court in San Francisco on Thursday, saying it was working out the details of the deal and would seek court approval for a payment within 60 days. Court documents did not disclose how much Robinhood will pay to settle the lawsuit, which sought damages for a class of all US users who held stocks or options during a service outage on March 2, 2020.
The lawsuit is also seeking damages for certain users who lost money due to the March 2, 3 and 9, 2020 outages.
A Robinhood spokesperson declined to comment on Friday.
Robinhood shares were trading around $10.38 on Friday afternoon, up around 11.9% from Thursday’s close.
The Menlo Park, Calif.-based company, which has marketed itself as democratizing finance, enjoyed a surge of interest in stock trading from retail investors during the pandemic, but has since faced challenges. legal challenges from users claiming the app hasn’t lived up to its promises.
The San Francisco lawsuit alleges that Robinhood’s outages caused users to lose money when they couldn’t trade. Users accuse Robinhood of negligence, breach of contract, violation of California fair trading laws and other claims.
Other users have taken legal action after Robinhood temporarily restricted trading in January 2021 during a rally by Gamestop Corp, AMC Entertainment and other so-called “same” actions. A judge dismissed the proposed class action lawsuit in January, saying such restrictions were permitted by Robinhood’s customer agreement.