Robinhood Says 'Thundering Herd' Caused Outage, Remedies Still Being Considered

The Robinhood stock trading app was back up and running Wednesday after two disastrous days in which it went offline, including a long outage on Monday that caused traders to miss out on a huge jump in the market.

Users continued to look for answers about whether regulators might act; at least one law firm was considering legal action on behalf of users; and the company was trying to explain what occurred in a bid to avoid millions of users abandoning the platform for a host of other free trading options.

Any lawyers going to start a class action against #Robinhood this is unacceptable. They should be out of business after this.

— Mario Pisano (@Goggles_Pisano) March 2, 2020

Online trading apps are regulated, but as of Wednesday, the Securities and Exchange Commission hadn't released any public statements on the issue.

The platform — which pioneered the free trades that are now much more common — has quickly grown to about 10 million users since its 2013 launch, and it was a victim of that growth.

The company said it has had record sign-ups, but its infrastructure couldn't keep up, a problem made worse by a highly volatile market that has had users looking to make trades at higher volumes.

'Unprecedented Load' For Robinhood App 

"We now understand the cause of the outage was stress on our infrastructure — which struggled with unprecedented load," cofounders and co-CEOs Baiju Bhatt and Vlad Tenev said in a Tuesday note to users.

"That in turn led to a 'thundering herd' effect — triggering a failure of our DNS system."

The Robinhood team has spent the last two days evaluating and addressing the issue, the co-CEOs said. 

"We worked as quickly as possible to restore service, but it took us a while. Too long."

Legal Action Against Robinhood Possible 

Attorney Max Schatzow of the Stark and Stark law firm in Lawrenceville, N.J. said in an email Tuesday that his firm was evaluating the possibility of legal action on behalf of users, but as of Tuesday hadn't filed a lawsuit.

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Photo courtesy of Robinhood.