The logo of Robinhood Markets, Inc. is seen at a pop-up event on Wall Street after the company's IPO in New York City.
The proposed class action by customers in the United States who claimed the investment app's outages in March 2020 shut them out of trading on pandemic-related volatility has been settled by Reuters- Robinhood Markets IncInc.
The company filed notice of the pending deal with a federal court in San Francisco on Thursday, saying it would seek court approval of a settlement within 60 days. The court papers did not reveal how much Robinhood would pay to settle the lawsuit, which sought damages for a group of U.S. users who held stock or options during a service outage on March 2, 2020.
The lawsuit seeks damages for users who lost money because of the outages on March 2, 3 and 9, 2020.
A spokesman for Robinhood didn't respond to a request for comment on Friday.
Robinhood shares were trading at around $10.38 on Friday afternoon, up 11.9% from Thursday's close.
The Menlo Park, California-based company, which advertised itself as democratizing finance, had a surge of interest in stock trading from retail investors during the Pandemic, but has faced legal challenges from users who claim the app did not live up to its promises.
The lawsuit in San Francisco alleges that Robinhood outages caused users to lose money when they could not trade. The users accused Robinhood of breach of contract, breach of contract, violating California's fair business laws and other claims.
Other users of the company sued after Robinhood temporarily restricted trading in January 2021 during a rally in Gamestop Corp, AMC Entertainment and other so-called meme stocks. A judge dismissed the proposed class action in January, saying such restrictions were allowed under Robinhood's customer agreement.