Robinhood: Men In Debt
July 1, 2021
The Good News
- Yale drama school to go tuition-free “in perpetuity” after $150 million donation (Axios)
- Methodist Church allows same-sex marriage in ‘momentous’ vote (BBC)
We wanted to let our readers know that we will observe Independence Day on Monday, July 5th, so there will not be a Daily Pnut in your inbox that morning. We’ll be back on Tuesday!
“It is unwise to be too sure of one’s own wisdom. It is healthy to be reminded that the strongest might weaken and the wisest might err.” — Mahatma Gandhi
“A man travels the world in search of what he needs and returns home to find it.” — George Moore
Robinhood: Men In Debt
Robinhood was a great idea: democratizing stock trading by making it simple, affordable, and available to youth on their turf — with an app on a mobile device. The mission was to “provide everyone with access to the financial markets, not just the wealthy;” hence, its iconic name.
The company was founded in April 2013 by Stanford grads Vlad Tenev and Baiju Bhatt, who in 2009 began building high-frequency trading software for financial institutions on Wall Street. At the time, executing a trade cost brokerages “fractions of a penny,” but they typically charged fees of $5 to $10 per trade, requiring account minimums of $500 to $5,000. Robinhood would provide commission-free trades of stocks and exchange traded funds with no minimum deposit. “We’re making investing accessible to young people,” Tenev said. “Most stock brokerages out there have been around for 30 years, their interfaces are clumsy, and they’re targeting older professionals and active traders. They’re no place for first time investors and that’s one of the things we focus on. Making it accessible. Having it be mobile friendly.”
The company made its private beta launch in February 2014 with 160,000 people who signed up to try the new app. By September, a half million people had signed on, the startup had raised $13 million, and there was a waitlist of new customers. The app officially launched in March 2015. In February 2016, the firm launched Robinhood Instant, which let users borrow up to $1,000 while their deposit cleared, and immediately trade with any proceeds they’re owed from stock sales that haven’t as yet transferred. By February 2017, the firm had executed over $30 billion in trades.
But cracks were beginning to show. The no-frills business model was leading to complaints about its customer service, with long wait times by phone and emails going unanswered. Internet blogs were filled with complaints about waits up to eight days to transfer money from a Robinhood account to a bank or vice versa.
In 2018, Robinhood added trading in cryptocurrencies, got a U.S. banking license, and said it would begin offering savings and checking accounts. Margin trading was offered via Robinhood Gold. But in October 2018, the company was accused of getting over half its revenue from payment for order flow (PFOF), a controversial practice that’s been called a kickback.
2019 and 2020 were rough years for Robinhood. The company catering to the everyman saw a $1.25 million fine by the Financial Industry Regulatory Authority (FINRA), hackers draining some 2,000 customer accounts, class-action lawsuits, a state securities violation complaint, and the suicide of a college student who saw a negative cash value of $730,000 in his margin trading account, later determined to be just a temporary showing.
By early 2021, once rising star Robinhood was getting one-star reviews on Google, and people were protesting outside corporate headquarters in Menlo Park, California. On Wednesday, FINRA fined Robinhood almost $70 million to settle allegations that the brokerage caused customers “widespread and significant” harm on multiple different fronts over the past few years. Its investigation found that millions of customers received false or misleading information on a variety of issues, including how much money they had in their accounts. It’s the largest financial penalty ever ordered by FINRA. (TechCrunch, Bloomberg, Finance Magnates, CNN, CNBC)
A Hong Way From Home
- Hong Kong authorities said Monday that passenger flights from the UK would be banned starting July 1 to curb the spread of the Delta variant of Covid-19. Britain is considered extremely high risk, and people who have stayed in that country longer than two hours will be unable to board passenger flights to the global financial hub. Arrivals from Britain were previously banned from December 2020 to May of this year, when restrictions were relaxed.
- Thousands of students studying in the U.K. had planned to return home for the summer, but the sudden change has caused chaos and left many students stranded. Hong Kong’s strict coronavirus regulations require that travelers cannot land in the city without securing a hotel reservation for quarantine. After the ban was announced, parents scrambled to find hotels for their children, but with such short warning, it soon became futile. (Reuters)
A Tangled Web
- Japan’s Supreme Court has upheld a death sentence given to a 74-year-old serial killer known as the “Black Widow.” In calling her crimes ruthless, one judge said: “She used the matchmaking agency to get acquainted with elderly victims one after another and poisoned them after making them trust her.” Police began investigating Chisako Kakehi after her husband died in 2013, less than two months after their wedding. An autopsy found cyanide in his stomach and blood, and Kakehi was arrested 11 months later.
- At her trial in 2017, Kakehi was found guilty and sentenced to death for using cyanide to kill two other men besides her husband, and attempting to kill a fourth, between 2007 and 2013. After each man’s murder Kakehi immediately began the process for inheriting his assets. Her legal team appealed the death sentence on the grounds Kakehi suffered from dementia and was incapable of aiding in her defense, but the court rejected her appeal. A date has not been set for her execution. (CNN)
Additional World News
- Brazil suspends Covaxin contract after ‘serious accusations’ of irregularities (Guardian)
- Rebels in Tigray reject calls for ceasefire after Ethiopian government forces withdraw from regional capital (CNN)
- North Korea’s Kim warns of ‘grave incident’ in fight against the coronavirus (WaPo, $)
- In UAE visit, Israeli minister builds ties after Gaza war (WaPo, $)
- China’s leader Xi hands out medals amid party celebrations (Yahoo)
- HMS Defender: Russia’s Putin accuses UK and US of military provocation (BBC)
- Thailand opens entire island of Phuket to vaccinated tourists, skipping hotel quarantines (USA Today)
- Bill Cosby was released from prison Wednesday after Pennsylvania’s Supreme Court overturned his 2018 sexual assault conviction. The panel of judges said in their opinion that former Montgomery County district attorney Bruce Castor’s decision not to criminally prosecute Cosby in 2005 was a deal that protected the disgraced actor against future criminal prosecution.
- After Castor’s decision, Cosby testified in a civil deposition without taking the fifth. That testimony was later used against him by a different prosecutor, which, the court reasoned, violated Cosby’s due process rights. No documentation affirming Castor’s deal with Cosby existed, something that went completely against protocol. Castor did issue a press release saying there was insufficient evidence to bring criminal charges, but he mentioned nothing about any non-prosecution deal he’d made with Cosby.
- Regardless, the Pennsylvania court determined it was enough for a get-out-of-jail-free card. Castor didn’t just decline to prosecute Cosby, he also fought against the actor’s 2018 prosecution. Interestingly, on the eve of his second impeachment trial in February 2021, Donald Trump abruptly replaced his slate of lawyers with just two men, one of whom was Bruce Castor. (WaPo)
Killer Heat Wave
- Excessive heat in the Pacific Northwest is killing people who are not acclimated to the soaring temperatures. In Oregon, 63 people have died since Friday, including 45 in the Portland area. Many of the deceased were “found alone, without air conditioning or a fan,” the medical examiner’s office said in a statement. “For comparison, for all of Oregon between 2017 and 2019, there were only 12 deaths from hyperthermia.” On Monday the state recorded 250 heat-related hospital visits.
- The same day, Royal Canadian Mounted Police received 25 sudden-death calls in western Canada in less than 24 hours. Several heat-related deaths were also reported in Seattle and Spokane, Washington. Particularly vulnerable are farm workers; under investigation are dozens of deaths likely due to heat in the region. A farmworker union is urging Washington state cherry growers and the governor to protect workers who are picking cherries in more than 110-degree heat. (NBC News)
Additional USA News
- Mother arrested in deaths of 3 children in Los Angeles home (NBC)
- New York Mayor’s Race in Chaos After Elections Board Counts 135,000 Test Ballots (NYT, $)
- GOP mega-donor funding deployment of South Dakota troops to border (The Hill)
- Big oil and gas kept a dirty secret for decades. Now they may pay the price (Guardian)
- Biden Unveils Plan To Combat Threat Of Western Wildfires Amid Extreme Drought (HuffPost)
- Progressives Are Hoping That Justice Stephen Breyer Steps Down At The End Of The Term (NPR)
- NY prosecutors examining cash bonuses at Trump Organization, sources say (CNN)
The Land Before Time
It seems our fascination with dinosaurs is never-ending. We know it was a city-sized asteroid that hit off the coast of what is now Mexico that doomed them to extinction 66 million years ago. The strike created the 125-mile-wide Chicxulub crater, unleashing climate-changing gases into the atmosphere that ultimately killed off 75% of life on the planet. But paleontologists have long debated what dinosaur life was like before the asteroid hit. Were they thriving, or already teetering on the brink?
A new study, published Tuesday in the journal Nature Communications, suggests that dinosaurs were in decline for as many as 10 million years before that final death blow. It’s this decline that impeded their ability to recover from the asteroid’s aftermath. “We looked at the six most abundant dinosaur families through the whole of the Cretaceous (period), spanning from 150 to 66 million years ago, and found that they were all evolving and expanding and clearly being successful,” said the study’s lead author in a news release. “Then, 76 million years ago, they show a sudden downturn. Their rates of extinction rose and in some cases, the rate of origin of new species dropped off.”
The researchers used computer modeling techniques that accounted for uncertainties, including incomplete fossil records, to arrive at the most probable result. They believe that the global climate cooling during the Late Cretaceous period —100 to 66 million years ago — may have contributed to the decline of non-avian dinosaurs. Avian or bird-like dinosaurs survived the asteroid strike and evolved into the birds we see today.
Another co-author of the study said: “It became clear that there were two main factors, first that overall climates were becoming cooler [making] life harder for the dinosaurs which likely relied on warm temperatures. Then, the loss of herbivores made the ecosystems unstable and prone to extinction cascade.” They also concluded “that the longer-lived dinosaur species were more liable to extinction, perhaps reflecting that they could not adapt to the new conditions on Earth.”
The debate is bound to continue, as the research behind this study contradicts other recent studies, using alternative methods, that have laid the blame for dinosaur extinction solely on the asteroid, and found that there’s no strong evidence that dinosaurs were in decline before the asteroid hit. (CNN)
- Study shows mixing AstraZeneca and Pfizer vaccines generates strong immune response against COVID-19 (CBS)
- ‘Extreme’ white dwarf sets cosmic records for small size, huge mass (Yahoo)
- Black Scientists Find Community—and Plan for the Road Ahead (Wired)
- How to Stay Cool Without Air-Conditioning (Wired)
- More vaccine progress: This time, it’s malaria (Ars Technica)
- Elon Musk calls rocket launch regulations ‘broken’ after aircraft delays SpaceX launch (CNBC)
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