Not upheld: failure to prevent investment scam / inadequate market abuse detection / failure to protect vulnerable customer complaint against Robinhood U.K. Ltd

Decision detail

Summary

Mr I invested $268,207 in Jayud Global Logistics Limited (JYD) shares through Robinhood between 26-31 March 2025 after being introduced to the stock by an unauthorised third party via social media and private messaging. The shares subsequently fell 94% in value, resulting in a loss exceeding £220,000. Mr I complained that Robinhood failed to protect him against the pump and dump scam, citing the firm's inclusion of JYD on its platform, failure to identify market manipulation, and inadequate warnings. The ombudsman found that Robinhood's execution only service meant Mr I was solely responsible for his investment decisions and that the scam operated outside the platform through third party channels beyond Robinhood's knowledge or control. The ombudsman concluded that pump and dump scams are inherently difficult for execution only platforms to detect, that JYD's NASDAQ listing provided reasonable grounds for trading, and that Robinhood had no reasonable basis to identify or prevent the scam. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that Robinhood provided an execution only service where Mr I was solely responsible for his investment decisions. The account terms made clear that Mr I's orders were unsolicited and based on his own decisions. While an unauthorised third party 'J' provided investment advice in breach of the General Prohibition under FSMA s19, the ombudsman concluded that s27 FSMA did not provide a basis to uphold the complaint because: (1) Robinhood had no knowledge of or control over J's activities; (2) it would be just and equitable under s28(3) FSMA to enforce the agreement; and (3) Robinhood did not knowingly accept introductions from unauthorised parties. Regarding market abuse detection, the ombudsman found that pump and dump scams are inherently difficult for execution only platforms to identify because the key features (social media promotion, private messaging, impersonation) occur outside the platform. Sharp price increases and volume spikes in smaller cap stocks can mirror legitimate market behaviour and are not unusual. JYD's listing on NASDAQ, an established regulated exchange, provided reasonable grounds for Robinhood to permit trading. The ombudsman noted that NASDAQ and regulators are primarily responsible for detecting market abuse. There was insufficient evidence that Robinhood should have identified suspicious patterns or that it breached its UK MAR obligations regarding systems to detect market abuse. Generic risk warnings were provided, and Mr I consciously chose to continue trading after another platform blocked further purchases.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website