Robinhood offers $ 15 rebate, blames breakdown on record deals – TechCrunch

It was not leap year, coding blip or hack that caused Robinhood & # 39; s massive outages yesterday and today that prevented clients from trading stocks. Instead, the co-CEOs write that "the cause of the failure was the stress on our infrastructure – which grappling with an unprecedented load. This in turn led to a thunderous herd effect – triggering a failure of our DNS system. "

Robinhood was offline Monday at 6:30 a.m. Pacific to 11:00 p.m. Pacific, and then had another outage this morning from 6:30 a.m. Pacific to 9 a.m. Pacific.

The financial tech giant funded by $ 912 million will offer compensation to all customers of its premium Robinhood Gold subscription for borrowing money for commerce as well as access to Morningstar research reports, Nasdaq data and larger instant deposits. He offers them three months of service.

A month of gold Robinhood costs $ 5 plus 5% annual interest on loans over $ 1,000, billed daily. Before a price change, the package per month could reach $ 200. However, paid users will only receive a $ 5 reduction per month, for a total of $ 15. It might seem woefully insufficient if Robinhood users failed to buy stocks like Apple that rose more than 9% on Monday. Robinhood calls this a "first step."

Affected Robinhood users can contact the company here ask for compensation. Below you can see the email Robinhood sent to customers late last night.

Robinhood email to customers late last night

Robinhood also strives to contact impacted clients on an individual basis and is investigating other forms of compensation on a case-by-case basis, company spokesperson Jack Randall tells me. It is unclear whether this may include money to make up for what traders might have lost by blocking their money in Robinhood accounts inaccessible during the outage.

The compensation could become a significant cost if the startup estimates that many of its 10 million users have been impacted. Markets gained a record $ 1.1 trillion yesterday, but some Robinhood traders may not have been able to buy because rebound occurred after massive sales due to fears of coronavirus .

Now the startup, valued at $ 7.6 billion, will have to try to regain the trust of users. "When it comes to your money, we know how important it is for you to have answers. Failures that you have experienced in the past two days are not acceptable and we would like to share an update on the current situation. . . We worked as quickly as possible to restore the service, but it took us a long time. Too long, "wrote co-founders and co-CEOs Baiju Bhatt and Vlad Tenev (disclosure: who I know from college).

As to knowing exactly what triggered the downtime, the founders write that "Several factors contributed to the unprecedented load that ultimately led to the outages. Factors included, among other things, very volatile and historic market conditions; record volume; and record account registrations. "There has been a frenzy of retail activity as a result of the coronavirus. There have also been sudden spikes in actions like Tesla in the midst of mainstream media attention.

In the future, Robinhood promises to "work to improve the resilience of our infrastructure to meet the increased load we have experienced. Worked simultaneously to reduce interdependencies in our overall infrastructure. We are also investing in additional redundancies in our infrastructure. "However, they warn that"we may experience brief additional interruptions, but we were now in a better position to resolve them more quickly. "

The outage comes at a vulnerable time for Robinhood, as brokerages like Charles Schwab, Ameritrade and Etrade have all recently decided to eliminate transaction fees to match the pioneering, commission-free trades of Robinhood. Although some of these brokerage firms have recently experienced infrastructure problems, the massive outages of Robinhood could push users to the incumbents which they might perceive to be more stable.