Some Robinhood users have been manipulating the stock-trading app to essentially trade with free money.
Margin trading is common, and allowed by most brokerage firms. It lets traders borrow money to buy stocks: the buyer puts down a percentage and the brokerage acts as the lender. The glitch in Robinhood's case allowed users to overstate the amount of money users had in their accounts to borrow against.
A Robinhood spokesperson said the company was "aware of the isolated situations and communicating directly with customers." Another Robinhood user posted a video claiming to have gotten 25 times leverage by turning $2,000 of stock into $50,000 worth of buying power. Multiple other users posted videos and screenshots of the hack, with directions on how to repeat the cheat code. Bloomberg News first reported the glitch.and more than 6 million users since launching in 2013. Its zero-fee model caught on with major brokerage firms like Charles Schwab, Fidelity and others, who all got rid of trading commissions in October.
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