Robinhood User Says $300,000 Restored From Hack, Then Taken Back

Gangti Zhu, a Maryland retiree, says he put almost his entire life savings into a Robinhood Markets account this year, only to lose about $300,000 in a hack.

He describes the same painstaking experience that other users have encountered: a panicked search for a phone number, a slew of emails after finding there’s no emergency line and then relief when the money was finally returned to his account.

The key difference, he says, is that Robinhood then took the funds back.

“Our team concluded its investigation and determined that your account was not compromised and that no unauthorized activity took place in your account,” read the Dec. 4 email from a customer support representative named Greg P., seen by Bloomberg. “As a result of our findings, we removed the corrections made by Robinhood.”

“I was traumatized,” said Zhu, 63. “I was left in the dark, hopeless, anxious and had no idea what had happened to my account and what to do next.”

His case is an extreme example of a hacking allegation at Robinhood, the trading app that exploded in popularity this year as Americans stuck at home from the Covid-19 pandemic looked to profit from a gyrating stock market. At a time when regulators are circling and the company is preparing for an initial public offering, the brokerage also is facing mounting customer-service complaints and claims of compromised accounts that can be thorny to resolve.

An internal investigation this year found that hackers hit about 2,000 accounts, Bloomberg reported in October, while advertisements on the dark web suggested thousands more could be at risk. More recently, Robinhood found “fewer than 40” instances of accounts being compromised by malware on user devices, according to a statement to Bloomberg for this story.

Malware can allow hackers to take over their account and make it appear that it was from a trusted device, making it more difficult to track fraud. Robinhood has taken steps with affected customers to help them fix the problem, along with offering a “goodwill credit,” David Favreau, the company’s head of fraud operations, said in the statement.

Zhu’s case is an instance where a claim, once addressed, has been reversed with little explanation. He had poured more than half a million dollars into his account — a much larger amount than the typical Robinhood user — and says hackers drained out the roughly $300,000 through options trades, which can be more difficult to identify as fraudulent than a simple removal of funds. He’s filed complaints with the SEC and the Financial Industry Regulatory Authority.

Robinhood, which has more than 13 million users, has promised to fully compensate customers if it determines they lost money because of unauthorized activity. The company said it has referred Zhu’s case to law enforcement.

“We are constantly monitoring for new threats and when we find fraud, we take steps to shut it down and remediate customers as appropriate,” Favreau said.

No Phones

For users who have seen money vanish from their accounts, resolving claims can be an arduous process. The Menlo Park, California-based company has no support line for users to call for help, leaving customers to rely on emailed responses that can take weeks, Bloomberg has previously reported.

Desperate users have turned regulators into their customer-service agents. This year through mid-October, there were 1,338 complaints filed to the Securities and Exchange Commission by Robinhood users with claims of hacking, data breaches, theft of funds, identity theft and fraud tied to their accounts, according to data from a Freedom of Information Act request. Robinhood agreed last week to pay $65 million in fines to settle SEC allegations that it failed to properly inform clients it sold their stock orders to high-frequency traders and other firms.

“It appears that Robinhood is falling far short of what customers have a reasonable right to expect,” said Barbara Roper, director of investor protection at Consumer Federation of America, an association of consumer-interest groups. “At the very least, I’d expect the company to offer a live chat option that would enable customers to get some assurance that their concerns had been heard and were being addressed.”

Robinhood has relied in part on external staffing firms to fill roles like customer support. But this year, as millions of new and often inexperienced customers have flocked to the app, the company has hired hundreds of support staff to fill offices across the country, often poaching them from bigger and more established rivals.

“We’re working on customer support across the board,” Vlad Tenev, Robinhood’s co-founder, said in a CNBC interview in October. “We’ve made huge investments and are continuing to make huge investments.

Reversed Decision

While many complaints are ultimately resolved, Zhu isn’t alone in having trouble finding recourse.

Joshua Kim, 32, signed up for Robinhood in October, planning on investing his money to save up for a cruise for him and his wife after the pandemic ends. He’d only been using it for about a month before the account was compromised, which he suspects was the result of his email being hacked.

The hacker sold his shares in Tesla Inc. and Inc., among others, and set up the cash management tool to transfer money from the Citibank account he had linked to Robinhood, according to Kim. Then, they used that to withdraw funds in Poland and Kansas City, Missouri. This all happened over the course of two days even though he asked that his account be locked on the first day, he said.

Customer service told Kim they’d investigate the incident, he said. After a few days, he got a similar email to Zhu’s, saying no fraud was detected and the money he’d lost — about $2,800 — wouldn’t be returned.

Kim followed up on the email, asking for more information about the investigation. The response he got frustrated him even more.

“Due to regulatory concerns as well as the security and protection of any associated Robinhood accounts, we’re unable to share details about the outcome of the investigation,” according to the email, which Kim posted in a YouTube video explaining the situation and asking for help from anyone who watched.

“It’s not about money, it’s about justice,” he said in a phone interview.

After Bloomberg reached out to Robinhood Thursday for comment on this story, Kim was contacted by the company. He spoke with Robinhood representatives Friday morning and said “their attitude completely changed.” They apologized and told him they’d return all the funds that were lost, Kim said.

The company declined to comment on whether it reached out to the customer as a result of Bloomberg’s inquiries. A person familiar with the response said Robinhood had been investigating the issue prior to Bloomberg’s outreach.

‘Hack Emergency’

Zhu remains in limbo. He says Robinhood was immediately informed of his compromised account. His 29-year-old son, Simon, who had encouraged him to join Robinhood, also reached out, about an hour after Zhu was locked out.

“My Dad’s Account is hacked,” Simon wrote to Robinhood customer support. “His account keeps buying Fitbit options in large numbers. This is a fraud and a hack emergency. Please help immediately!!!”

For Zhu, the outcome is critical. The $300,000 is more than half of the retirement savings he has in his Robinhood account. Zhu said he’s keeping the account locked until the dispute is resolved. He has just $34.61 in his savings account.

“We are hopeless,” he said. “This is my last savings.”

— With assistance by Benjamin Bain

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