Do you remember how I exposed Robinhood as a scam company back in 2018?
Guess what. I was right (again). See here, here, here, and here.
The reaility is that I didn't even know anything about Robinhood. I didn't even check its website (and I still haven't to this day because I try to stay far away from filth).
All I knew about Robinhood was that it didn't charge commissions for trades (this was before all of the online brokerage firms caved in to eliminating trading commissions).
I also noticed that Robinhood was targeting the young, naive and broke crowd.
So how did I know Robinhood was a scam?
I knew the company had to be selling order flow to predatory hedge funds in order to make money since it didn't charge commissions for trades. That meant the customers of Robinhood were getting ripped off. And I knew they had no idea what was going on. But I tried to warn them in 2018.
How you can get ripped off if your brokerage firm sells your orders to hedge funds?
First, all orders are routed to market makers. There are legit market makers and there are predatory market makers. Most of the predatory market makers are hedge funds that pay for the obligation (it's actually an opportunity, hence why they pay) to fill orders (i.e. completing the order request) from brokerage firms.
Why would hedge funds pay brokerage firms for the task of executing its orders?
Because the fund will gain access to a huge number of orders for which it can use to game the system.
Essentially, what happens is that if your orders are being sold to a private market maker like Citadel, you're going to pay a higher price for the securities you purchase than the price Citadel pays. Multiply the amount of money stolen from you for a single trade (we will assume it's a couple of pennies but I believe it's more at Robinhood) taken by Citadel from your order by one million orders. So let's say $0.02 times one million. That's $20,000.
Now imagine you're executing hundreds of millions of trades like this each day. That's a huge sum of money. And it's theft as far as I'm concerned.
Citadel has been ripping off investors for many years by paying for order flow and delivering poor execution. Several years ago I discussed how Citadel took a huge investment stake in E-Trade shortly after the 2008 financial crisis in order to gain access to its order flow.
At one point I believe Citadel controlled around 80% of E-Trade's order flow. They wanted to control 100% but the SEC did not allow it (things might have changed since then). I became aware of this situation because I noticed some really bad executions when putting orders through E-Trade that might otherwise not have been noticed by less experienced investors. That prompted me to do a little investigation.
I am unaware of any penalties faced by Citadel for what I believe was a several year period of poor order execution at E-Trade by Citadel. The sad reality is that SEC is much more of a friend than a foe to Citadel founder, billionaire Ken Griffin. If you don't believe me, do some digging.
As a matter of fact, the SEC is quite friendly with the biggest Wall Street crooks. The trick pulled by the SEC is to go after small time funds and stock brokers, and fine them for some minor violation, and get the Wall Street Journal to publish the sanctions. That way, main street will be fooled into thinking that the SEC is protecting them from the crooks. Meanwhile, the real crooks are stealing tens of billions of dollars from investors every day.
Now you are beginning to see how Griffin became a billionaire. Of course, there are many other ways the hedge fund industry steals from investors, but that's a topic too large to cover today.
Furthermore, I realized that because Robinhood targeted young people and low-wage earners who had no clue about how the stock market works, hedge funds that were paying for Robinhood's order flow were sticking it to the customers of Robinhood by delivering really bad order execution; much worse than that seen at legit online brokerage firms like Schwab and Ameritrade (full service brokerage firms like JPMorgan and Merrill Lynch usually go through their own market makers so they can scam customers internally).
It appears that the slime bags at Robinhood were completely aware that its hedge fund clients were delivering terrible order execution. This might explain why Robinhood management failed to monitor order execution time and price and check it against industry norms and report this data to proper regulatory authorities.
What this means is that predatory hedge funds, the real customers of Robinhood, were essentially stealing from the "poor." And Robinhood was making money as the account holders it pledged to help were being ripped off. What a disgusting disgrace.
Robinhood management knew the kids using their scammy platform would have no clue as to how they were being ripped off. These slime bags even hid legal disclosures that were supposed to reveal that order flow was being sold.
Why did they do this?
Because they knew that any fines the company might face (if caught) would pale in comparison to the money it would bring in selling order flow to predatory hedge funds.
In addition to my brief career on Wall Street. I also worked in the venture capital industry. Based on my knowledge of this industry, I'm confident that the VC firms that are invested in Robinhood were consulted prior to the decision to not provide proper disclosure regarding the selling of customer order flow.
The bottom line is that Robinhood is helping the big guys take money from its customers (the small guys).
Robin Hood didn't steal from the poor to give to the rich, but Robinhood does.
Remember, I knew all of this years ago without even visiting the company's website (it pays to be a Wall Street insider). And I discussed it briefly in 2018.
See Mike Exposes the Robin Hood Stock Trading App as a Deceptive Scam Targeting Ignorant Millennials
Hopefully by now the customers of Robinhood realize how they've been duped. And I hope this leads them to close their accounts.
Never reward scam companies with your business or you deserve to be scammed.
Another obvious giveaway that made me confident that Robinhood was not an ethical and legit company was that its marketing pitches were overly focused on wanting to help the small guy.
Always remember that whenever someone or some company claims that it has a platform for you the small guy, as opposed to big corporations, it's always a scam.
There are numerous examples backing this claim (YouTube, eBay, Uber, Facebook, Alex Jones money bombs, Brian Rose's digital freedom scam, etc.).
Finally, remember that there's no free lunch.
There are no free email accounts and no free social media accounts.
When a company claims to offer you something for free, you can bet you're going to be scammed. And the price you ultimately might pay could be huge in terms of the damage it does to your life.
You're always better off paying directly for goods and services rather than getting them for free, because nothing in life is ever really free. There's always a hidden price you will have to pay. And that price might end up destroying your life.
When you pay for something, the business relationship is between you the customer and the vendor who receives payment. Therefore, the vendor has your best interest in mind because you're the one paying the bill.
But when you accept goods and services for free, there will always be a third party involved who fits the bill. Thus, the business relationship will be between the vender and the third party who pays for your goods or services. That means you're going to get hosed by the third party without realizing it.
It's similar to all ad-based content, which can never be trusted because content providers are owned by advertisers.
And if the advertisers aren't making money from you, they won't pay the content provider.
Thus, you can see how advertisers and content providers work together to make sure you're exploited. And this explains why all ad-based content is low-yield garbage at best (i.e. a waste of your precious time) and dangerous at worst (most often the case).
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