Traders are exploiting a glitch in the Robinhood Markets Inc. system – referred to as an “infinite money cheat code” by users in the WallStreetBets forum on Reddit – to excessively tap borrowed funds to trade stocks.
The Robinhood Markets system lets traders borrow money from the company or trade on margin for a $5-per-month fee and operate without commission fees. One trader claimed to have gained a $1 million position from a $4,000 deposit, according to a Bloomberg report, which cited a Robinhood Markets spokesperson as saying the company is “aware of the isolated situations and communicating directly with customers.”
Noting that “software vulnerabilities are like secrets in a soap opera – sooner or later, somebody is going to find them and then everybody will know,” Jonathan Knudsen, senior security strategist at Synopsys, said they can happen even when organizations are using the best secure development process.
“You can be sure that Robinhood is revising its development process right now to make sure no other vulnerabilities like this slip through the cracks,” he said.