He Lost $860,000 On Robinhood And He’s Not Getting Much Sympathy

He Lost $860,000 On Robinhood And He’s Not Getting Much Sympathy

Who hasn’t seen the commercials for the stock-trading app Robinhood? The ones that proclaim, “The new kind of investor is changing things up with an app that’s changing the way we do money.” 

Navy medic Richard Dobatse had an account with $1 million+ through trading stocks on the Robinhood app, then lost $860,000 of it. He’s not receiving much sympathy.

Well, San Diego Navy medic Richard Dobatse thought it might be a good idea to try out Robinhood in 2017 as a way to get into stock trading. Turns out it wasn’t such a good idea for Dobatse. He lost $860,000.

Dobatse, 32, said he had “been charmed by Robinhood’s one-click trading, easy access to complex investment products, and features like falling confetti and emoji-filled phone notifications that made it feel like a game,” The New York Times reported.

Initially, Dobatse funded his new Robinhood account with $15,000 in credit card advances. But over and over again, he lost money on his trades. Instead of stopping, Dobatse took out two $30,000 home equity loans so he could buy and sell more speculative stocks and options, hoping to pay off his debts. His account value increased to more than $1 million this year, but he lost almost all of it. Earlier this month, his balance was $6,956, The Times reported.

Dobatse, who is married with three children, told The Times, “They make it so easy for people that don’t know anything about stocks. Then you go there and you start to lose money.”

Twitter users didn’t let Dobatse off easy. Some posted that he and others using Robinhood know they are taking a risk.

“So he wanted to ‘trade to pay off his debts’ but then kept trading after earning more than enough to do so and then lost it all. The psychological consequences of realizing you are dumbass should be dire” AllJobsMatter! (@mrmrmrj) tweeted.

Robinhood was founded in 2013. Its “no trading fees or account minimums” soon made it a cultural phenomenon and a Silicon Valley darling. The start-up became hugely popular and climbed to an $8.3 billion valuation. 

“In the first three months of 2020, Robinhood users traded nine times as many shares as E-Trade customers, and 40 times as many shares as Charles Schwab customers, per dollar in the average customer account in the most recent quarter. They also bought and sold 88 times as many risky options contracts as Schwab customers, relative to the average account size, according to the analysis,” The Times reported. 

More than 3 million new accounts have been created this year with many mom-and-pop traders turning to the stock market to make quick money when markets tanked in March, BusinessInsider reported.

Dobatse isn’t the only Robinhood horror story. In June, 20-year-old college student Alex Kearns in Nebraska killed himself after he logged into the app and saw that his balance had dropped to negative $730,000.

With the average user age being 31, Robinhood’s typical customer is young and has very little investing know-how. 

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“They encourage people to go from training wheels to driving motorcycles,” said Scott Smith, who tracks brokerage firms at the financial consulting firm Cerulli. “Over the long term, it’s like trying to beat the casino.”

Dobatse not only wants others to learn from his cautionary tale but also wants to take action against Robinhood. He is planning to appeal his case to financial regulators for arbitration.