The investing app Robinhood has been embroiled in a lawsuit following allegations that the app's negligence led to people's personal information being leaked.
San Francisco law firm Erickson, Kramer, and Osborne filed a class action lawsuit against Robinhood in February 2021. The firm filed the suit on behalf of Siddharth Mehta, Kevin Qian, Michael Furtado, and other Robinhood users who claimed their accounts had been hacked.
According to the motion for settlement that was filed on July 1, Robinhood “used substandard security practices and lacked security measures used by other broker-dealer online systems,” which led to multiple data breaches.
According to the complaint, Robinhood's cybersecurity system “lacks simple and almost universal security measures used by other broker-dealer online systems, such as verifying changes in bank account links.”
Around 400,000 users say their accounts were hacked. The agreement received preliminary approval in August.
Robinhood's deputy general counsel Lucas Moskowitz claims that the company takes security “very seriously.”
“We continue to take numerous steps to safeguard accounts, including using hashing algorithms, encryption, two-factor authentication and other account security measures,” Moskowitz said in a statement.
How Much They Settled For
Robinhood agreed to pay $19.5 million in damages and $500,000 in fees. United States customers whose accounts were hacked between January 1, 2020, and April 27, 2022 are eligible to file a claim for up to $260 per person.
Individual payouts will be broken down like this:
Up to $100 for out-of-pocket expenses resulting from the breach
• Up to $100 in reimbursement for identity theft protection or credit monitoring services
• Up to $60 for time spent responding to the issue
Class members will also be eligible for two years of free identity and theft protection as well as credit monitoring.
In addition to the cash payments and free protection services, Robinhood is also required to improve its security procedures, which include:
- Supplemental two-factor authentication
- Prompting users to update passwords
- Proactive monitoring of account takeovers
- Cybersecurity awareness campaigns
- Real-time voice support for customers
How to File a Claim
Notification of the settlement went out on September 13. The website will include an online form for class members to fill out, as well as a printout if they prefer to mail it in.
Who Is Eligible?
Americans who were notified that their Robinhood account was hacked or illegally accessed between January 1, 2020, and April 7, 2022. People who reached out to notify Robinhood that their account was hacked in this time frame are eligible as well.
When Will The Payments Go Out?
The hearing to assess final approval has been scheduled for May 16, 2023. Class members usually receive payment after that, but there could be delays due to appeals.
Robinhood is not a stranger to controversy. In February 2021, the company was sued by the family of a 20 year old user who took his own life after falsely believing he had $730,000 in losses on the app.
The same year, the company was hit with several civil suits after it froze GameStop trading after a Reddit campaign started to buy up shares of the video game retailer that caused the stock price to spike.
In June 2021, the Financial Industry Regulatory Authority ordered the company to pay more than $70 million in fines for violating financial regulations and providing customers with false and misleading information.
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This article was produced and syndicated by Wealth of Geeks.