- Lionsgate via YouTube
- Josh Brown, CEO of Ritholtz Wealth Management spoke on CNBC about Robinhood users on Reddit who bragged about exploiting a glitch that gives free borrowed cash.
- “It’s totally immoral behavior on behalf of the users it’s not really Robinhood being immoral, but they got to tighten up, it’s finance.”
- A user posted the CNBC video to Reddit, with the reply: “Cheers!”
- View Business Insider’s homepage for more stories.
Robinhood, the investing app, is coming under fire after Redditors found a glitch in the app that allowed users to trade an infinite supply of borrowed cash – one user turned a $3000 deposit into a $1.7 million stake.
Josh Brown, CEO of Ritholtz Wealth Management and a regular guest on CNBC called users who bragged about taking huge positions “psychopaths.”
Appearing on CNBC’s “Closing Bell,” Brown said:
“Here’s what these kids are doing – and they’re psychopaths,” he said. “They figured out that they could sell puts, take in option premiums, use that to buy more shares of a stock and sell puts against those shares and use that to take more option premiums and then on and on, in like a Jacob’s ladder kind of thing, to the point where only a couple thousand dollars at risk they could take a million-dollar position.”
The video of Brown’s comments was posted on the subreddit Wallstreetbets, which a user replied with: “Cheers!”
“These kids are out of their minds they’re looking for ways to take reckless risks, and arguably they’re doing it to impress their friends on a chat site,” Brown said. “It’s totally immoral behavior on behalf of the users it’s not really Robinhood being immoral, but they got to tighten up, it’s finance.”
“This is not like where somebody walks and accidentally falls into a hole, you have to be deliberately trying to do this,” he added.
- CNBC, screenshot
Markets Insider’s Ben Winck earlier this week reported how the glitch worked, saying the app mistakenly adds borrowed money to a user’s cash pile, and that “there seems to be no limit to how much a user can exploit the trick.”
The “free money” cheat shared by a user found that users were able to turn a $4,000 stake into a $1,000,000 position.
Brown said that not every Robinhood customer is a risk and estimated that there was “no way” Robinhood intended this glitch to happen.
“If one of these kids blows up an account, Robinhood is out the money,” he said. “These kids aren’t coming in to make a margin call for a million dollars. Let’s not act like they’re trying to hurt anyone.”
Brown is known in finance circles for his smart and witty takes on the market, mainly via his Twitter account, @ReformedBroker.
The Robinhood glitch was spread widely on the Reddit thread r/wallstreetbets.
The glitch looks like it may not yet be fixed. Robinhood is “aware of the isolated situations and communicating directly with customers,” a spokeswoman told Markets Insider’s Winck in an emailed statement earlier this week.