Robinhood users had accounts looted. Risk of same thing happening to IB?

I'm a satisfied customer of IB. So far, I'm happy with the security aspects of IB platform. What happened to Robinhood users scare me. Has similar things happen to IB customers before? What's the risk of same thing happening to IB customers? What precautions should we take to minimise this risk?

https://www.bloomberg.com/news/arti...ad-accounts-looted-say-there-s-no-one-to-call

 

Interactive is the most stable platform and their phone app is killer! Hope some of the Elite Whales can comment on this.

 

lmao @ being afraid. A) your deposits are insured up to 250k like a bank. This is your protection if they ever did get hacked. That is the beauty of working with real brokerage/FINRA/SPIC type institutions.

Not saying you would get your mula back the next day, it will take time, but you will get it back.

 

So what would be the best method for a trader to protect against a "black swan" event that involved that same Robinhood incident.

How would a trader divvy up a $10 million account?

 

I have to disagree here. I am certainly not saying that the customers at Robinhood whose accounts were hacked have not recourse or protection. But SIPC is intended to protect accountholders from losses if the brokerage fails. Failure, in this context, refers to the brokerage becoming insolvent or declaring bankruptcy.

This hacking event is not likely to lead to the insolvency or bankruptcy of Robinhood.

Robinhood and/or the banks that participated in the fraudulent transfers may well be liable, and they will probably have to return the customers' funds. But SIPC will not be applicable unless the losses are severe enough to cause Robinhood to become insolvent or unable to meet its reserve requirements.

Have a look at this site:
https://www.sipc.org/for-investors/what-sipc-protects

The first sentence on that page says:

"SIPC protects against the loss of cash and securities – such as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm."

SIPC does not protect the accountholder from theft by a third party.

BMK

 

If you had 10 million, you would know, by the time you hit 3 million.

 

IMO, if IB got hacked and was required to payback every single cent to all their customers I can almost guarantee they would be insolvent/declare bankruptcy.

And when bankruptcy is declared that marks them as a "financially troubled brokerage firm"

In which case, the FED would step in and work out some type of deal with them.

 

Not sure, I dont have 10mil so I dont have those problems yet lol.

First I would ask them if each account is protected 250k or do 5 accounts with my name on them fall under one 250k umbrella. Depending on their answer Id go from there and find a solution.

Worst case, multiple brokers. Not really sure how Firms like GOLDMAN do it, but there are premium brokers out there who could insure for higher than the minimum. Meaning 250k Fed insurance, and they match that 250k. Not sure though.

 

Robinhood wasn't hacked and your deposits aren't insured when your broker isn't hacked, but when someone obtains your password and logs in pretending to be you. Try proving then that the broker was at fault.

 

I have not read the full text of Bloomberg article, because they have a paywall, or else they want me to get out of private browsing, which I am not going to do. But I found this article at Gizmodo:

https://gizmodo.com/robinhood-hackers-stole-from-the-rich-and-gave-to-them-1845328723

Robinhood allows (or allowed) users to transfer funds to a bank account that had never before been linked to the brokerage account, without first verifying that the bank account belonged to the brokerage accountholder.

I would be willing to make a small wager that no other broker operating in the USA allows such transfers.

It also appears that Robinhood has no telephone customer service, and that at least one victim of the hackers tried to report a pending transfer that she had not authorized, and they failed to take action quickly enough, because the only way to communicate with customer service was through messaging.

Robinhood's position is that neither their network nor their mobile apps were hacked, and that the hackers gained access by hacking the users' e-mail accounts. And that may well be what happened.

But I think Robinhood may still have some serious liability here. Allowing transfers to an unverified bank account is a major weakness that should never have happened.

Whether any of the banks are liable is a different question. Have not had time to think about that. ACH transfers can often be reversed, but the process takes time.

Last year some online company pulled $30.00 out of my personal checking account using an ACH transfer. There was no hacking. Someone, somehow, somewhere, got hold of my routing number and account number, together with my name. And that's all they need to initiate an ACH withdrawal on some platforms. And banks will honor it. It was not a transfer. It was simply a purchase. It was a fraudulent electronic check payment.

I reported it within a week or two, I think. I definitely reported within the time frame required by federal regs.

And I got my money back. But it took more than a month.

ACH electronic transfers can be reversed precisely because they are electronic checks. And just like you can stop payment on a traditional paper check, you can also stop payment on an electronic check.

ACH electronic transfers are not wire transfers. Sometimes that term is used incorrectly, even by people who work at banks for other financial institutions. A wire transfer is something else.

A wire transfer is cleared funds, immediately available on the other end. And with very few exceptions, a wire transfer cannot be reversed. Metaphorically, a wire transfer is more like an electronic cashier's check.

The Robinhood activity was almost certainly ACH transfers and not wire transfers. They will be reversed. But it will take time for the banks to investigate.

BMK