Robinhood Sinks 5% After Prosecutors Reportedly Charge Two Former Engineers Over Crypto Trades; Webull Drops 9%

Federal prosecutors in Manhattan just charged two former Robinhood engineers over crypto trades, and the fallout is already hitting brokerages that had nothing to do with it.

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Robinhood Markets (NASDAQ:HOOD | HOOD Price Prediction) is falling on a legal headline that names two of its former employees rather than the company itself. Robinhood stock is down 5% to $105.1 in Wednesday trading after federal prosecutors in Manhattan disclosed criminal charges tied to trading in crypto derivatives ahead of Robinhood listing announcements. Webull (NASDAQ:BULL) is sliding harder in sympathy.

The setup is unusual because the asset the two brokerages sit exposed to isn’t doing much today. The iShares Bitcoin Trust ETF (NASDAQ:IBIT) is down 0.6% to $42.86, while the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is up 0.4% to $760.33. Robinhood and Webull shares are being repriced on regulatory and reputational risk, not on a Bitcoin (CRYPTO:BTC) move.

Webull stock is down 9% to $7.92, extending losses even though the charges name former Robinhood employees and no one at Webull. That reads as sympathy selling across retail brokerages with crypto exposure.