Whether it’s a Nigerian (or not Nigerian) prince promising to send you loads of money for your bank account information or hackers from various parts of the world stealing your personal information, the vultures are descending on the pandemic, and the latest victims are the thousands of new retail investors flocking to Robinhood, the wildly popular zero-fee trading app.
An internal review by Robinhood found that nearly 2,000 accounts were compromised in a recent hacking spree that siphoned off customer funds.
Bloomberg reported that the hackers compromised users' personal email accounts outside of the trading app and used those emails to gain access to their Robinhood accounts.
Earlier this week, Robinhood sent push notifications to users suggesting they enable two-factor authentication on their accounts.
“We always respond to customers reporting fraudulent or suspicious activity and work as quickly as possible to complete investigations,” the company said in an emailed statement. “The security of Robinhood customer accounts is a top priority and something we take very seriously.”
However, victims of the attack complained on social media that they couldn’t reach Robinhood’s customer service for days.
Many Americans opened their first online trading accounts during the pandemic, using part of their stimulus checks to trade stocks.
A dramatic sell-off in stocks in the last four months, combined with more time at home due to quarantine, has further magnified the retail investors interest in the stock market--even those who have never dipped their toes in the waters before, and know little about doing so.
All major online stock trading platforms have seen a surge in demand in recent months and new accounts spike in the first quarter. Many of the new users are young or even first-time investors. Over half of them are aged 34 or younger.
Online brokers saw new accounts grow as much as 170% in the first quarter, while the second quarter topped even that.
Despite glitches and crashes on heavy trading volume days, Robinhood has added 3 million accounts this year, with half of them first-time traders.
The start-up grew from one million subscribers in 2016 to six million accounts in 2018 and currently has more than 13 million. In August, the firm raised $200 million from investors and was valued at $11.2 billion.
Despite huge growth in popularity, especially popular with millennials with a median customer age of 31, it hasn’t been with some reputational hiccups.
In March, when the market was tanking and volatility was at an all-time high, the Robinhood platform continuously crashed.
Robinhood attributed the outages to an infrastructure "instability" that kept systems from communicating with each other. The issue prevented clients from accessing its app, website, and help center.
Also, in June, a young options trader committed suicide after seeing a negative portfolio value that did not represent his actual balance.
However, the increase of newbie investors and the increase in trading overall has also created an unparalleled opportunity for hackers, say cybersecurity experts.
CNBC reported last week brokerages’ accounts are being targeted on the “dark web” with Robinhood accounts being the most expensive, suggesting they are easier to break into. The report said that hacked account credentials are available for prices ranging from $3 to $30.
Online brokers are not the only likely targets of cybercrime, either.
Due to increased online shopping, lockdowns and remote working environments, many analysts are warning about the cyber threat on insecure platforms during the pandemic.
Phishing attacks, the most prevalent hacks, have jumped more than 600% since the start of the COVID pandemic, targeting businesses, individuals and governmental agencies.
Even though many cybercriminals have pledged not to attack health-care providers during the coronavirus outbreak, the World Health Organization said it had experienced a five-fold increase in the number of cyberattacks since the outbreak of Covid-19.
By Fred Dunkley for Safehaven.com
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