He says Fidelity wouldn’t let him sell during Reddit mayhem, costing him $830,000
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He says Fidelity wouldn’t let him sell during Reddit mayhem, costing him $830,000

Luis Hernandez on Thursday filed a claim against Fidelity Brokerage Services with Wall Street’s self-regulator for blocking his efforts to offload shares Nokia ()NOK) And AMC ()AMC) On January 28, his lawyer told CNN Business. The lawyer said that Hernandez, who lives in Arizona, eventually sold the shares at a steep discount from where they were initially trying to sell.

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.

This episode shows the chaos that occurred last month when A. Merchants’ army on Redcat’s Wallcatbats community Sent GameStop ()GME), AMC and other stocks are skyrocketing. There were brokerages like Robinhood The Clearinghouse was forced to infuse staggering amounts of capital. Hedge funds such as Melvin Capital placed bets against Gametop Small positions blew up. Some retail investors lost money due to the eruption of reddit-driven shares.

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.

Hours later, Robinhood annoyed customers By Purchase temporarily suspended Of volatile shares including AMC and Nokia. Other brokerages also banned Reddit shares.

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%.

He would be alive today and parents made desperate attempts to contact Robinhood before killing the son.

“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.”

In addition to Fidelity, Hernandez claims the name National Financial ServicesThe company has a brokerage subsidiary.

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.

Asked tenev During a recent interview on the platform Clubhouse, why the app only restricted purchases and not sales of Gametop and other Reddit stocks.

“People get really annoyed,” Tenev said, if they are holding stock and they can’t sell it. “

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