He says Fidelity wouldn’t let him sell during Reddit mayhem, costing him $830,000
Lawyer William Lewis, representing Hernandez, said in an interview, “It caused a huge loss to our client in just a few days. It was really devastating.”
Nishtha said that she has not received this specific complaint and does not comment on specific customers. The company said that there is no restriction, except for those customers known as margin money. Nishtha said it regularly adjusts margin and risk requirements for individual stocks based on market risks and other factors.
“The loyalty encourages all investors to review their investments and align with their overall financial plan,” the company said in a statement.
The Financial Industry Regulatory Authority (FINRA), Wall Street’s self-regulating agency filed by Hernandez, Does not publicly release claims and declined to comment.
A big stake was lost
On January 27, Hernandez bought $ 1.5 million in shares at AMC, his lawyer said. Stock of the movie theater chain skyrocketed 301% that day, driven by traders on wallcrafts.
The next morning, Hernandez bought $ 1.5 million in shares in Nokia, another favorite of WalvetBats.
His lawyer said that to get ahead of the impending saleoff, Hernandez tried to offload his AMC and Nokia shares when they were trading above the price paid for them.
“Over a period of hours he was trying to sell. The computer program would not allow him. He called customer service and they told him he should be able to sell,” Lewis said.
Margin call started
The timing was particularly important because Hernandez used money borrowed through brokerage, known as margin trading, to buy the majority of the shares.
Eventually, the stock price of AMC and Nokia became so deep that it triggered a margin call, demanding brokerage that investors who buy stocks with borrowed money accumulate additional cash or securities. Hernández attempted to deposit cash to cover margin calls, but Fidelity refused to allow him to do so, his law firm said.
According to the claim, Hernández was forced to liquidate his shares at a strong discount from where they were initially trying to sell – the delay resulted in a loss of about $ 830,000.
AMC closed down 57% on 28 January, while Nokia lost 28%.
“The really disturbing thing for me is that when he wanted to sell, they couldn’t execute orders,” Lewis said. “But as soon as there was a margin call, and they wanted to sell it, he was able.”
Robinhood CEO Vlad Tenev is expected to testify at the Reddit Turbulence hearing in financial markets in Congress next week, two people familiar with the matter told CNN Business. Tenev is likely to face questions over trade restrictions of Robinhood.
“People get really annoyed,” Tenev said, if they are holding stock and they can’t sell it. “