Robinhood Markets, a stockbroker geared for retail investors, has disclosed that it suffered a massive security breach. The firm said that an unauthorized party gained access to the personal data of nearly 5 of its 20 million customers.
This is one of the biggest data breaches of any stockbroker in history. A blog published by the company said that the attack was “socially engineered” through a customer support employee.
The hacker was able to gain access to the firm's customer support system, something that eventually gave them access to this data. Despite what appears to be a series of data breaches, Robinhood did not offer additional details on what transpired and what it is doing to secure its systems.
Nonetheless, the trading firm noted that the email addresses of at least 5 million customers may have been compromised. Robinhood also notes that the full names of roughly 2 million people were also exposed.
The firm added that at least 500 customers may have suffered a more serious breach with their full names, zip codes, and birth dates exposed. In addition to this, the California-based fintech start-up noted that there was an extortion attempt by the hacker.
Robinhood, however, notes that it did not entertain the idea and the matter was immediately reported to relevant law enforcement agencies for further action.
The trading broker added that it was in the process of notifying affected customers about the breach and the actions they can take to safeguard their accounts. The news was not received very well in the markets. Robinhood, which launched its IPO, just recently, saw a 3% drop in stocks.
It’s also not the first time the trading app has been breached by hackers. Although this hack appears to be the largest ever, it is not the only one we have seen.
In October 2019, it was reported that hackers had managed to infiltrate the accounts of nearly 2,000 people and stole funds. The breach targeted Robinhood users whose emails had been compromised outside the trading app. In essence, it was not internal access to its systems.
Robinhood has managed to cut a niche for itself as the leading broker for retail investors. During the pandemic, the app saw a huge surge in the number of users. As people continued to get their stimulus checks as part of COVID-19 relief, they were looking at ways to invest and the stock market was an ideal bet. Robinhood was the gateway and it became synonymous with retail investing.
The app was in fact in the middle of a huge scandal in the GameStop short squeeze. At the time, Reddit users banded together to buy GameStop stocks to counter huge short interest by Wall Street hedge funds.
As the hedge funds started to lose billions, Robinhood suspended buying of stocks for GameStop, something that was highly controversial. The was seen as yet another Wall Street firm here to serve the interest of billionaires. This recent breach will also come as a huge dent in its reputation as a retail broker.