AMC's CEO Told Robinhood To Halt Its Stock Token. Robinhood Told Him To Send Lawyers

AMC Entertainment Chief Executive Adam Aron demanded early Friday that Robinhood stop trading the stock tokens that reference his company's shares, and said AMC has asked its outside securities counsel to examine whether it can compel the broker to stop. Robinhood's chief legal officer, a former SEC commissioner, refused within hours.

A US-listed company has no say over the instruments. Robinhood's stock tokens are issued out of Jersey by an entity that Robinhood's own disclosures describe as unregistered and unsupervised, they are sold only to non-US persons, and only one firm is allowed to create them. Aron's complaint is that a market referencing AMC exists at all, and there is no registration, listing agreement or transfer agent relationship through which AMC could withdraw from it.

AMC shares traded at $2.765 at 11:14 a.m. ET Friday, up 8.9% from Thursday's $2.54 close, on 30.6 million shares against an average of 6.7 million, according to Nasdaq. The tokenized version changed hands at $2.75 across 30 pools on Robinhood Chain, with $200.8 million of 24-hour volume across 593,076 transactions on $6.7 million of liquidity, DEX Screener data shows. Robinhood shares fell 1.9% to $122.34.

Send Your Lawyers

Aron opened at 5:18 p.m. ET Thursday, after the New York Stock Exchange had closed, with a post that reproduced Robinhood's own disclosure language. “Robinhood apparently is behind an effort related to ‘tokenized real-world assets including Stock Tokens’ for AMC Entertainment (and supposedly 190+ other companies). They are not registered under U.S. securities laws !!!!!!” he wrote. “I find this practice to be contemptible, outrageous, disgusting, detestable, inexcusable, vile. How can it possibly be legal? We have no connection to this at all, and do not condone it in any way.” The post has 1.6 million views.

Robinhood Chief Executive Vlad Tenev replied at 11:11 p.m. ET with four words: “What’s the concern?” That reply has 2.6 million views and 8,432 likes.

Aron answered at 2:30 a.m. ET Friday with a 280-word list. He said Robinhood had set up “an operation in far offshore Jersey, an island 3000 miles away, and market a security sort of posing as AMC in some shape or fashion, and not comply with U.S. securities laws.” He said the tokens “decouple stock token ownership from a company’s ability to control its own capital raising efforts,” that they “pretend to be some form of stock ownership” and “deprive investors of their rights,” and that “this quasi-fake market you are creating on the island of Jersey sows distrust amongst the public about financial markets in general.”

He closed by calling on Robinhood “to voluntarily CEASE AND DECIST the trading of AMC stock tokens,” adding that “if you don’t, our high priced securities counsel has been asked to see whether we can force you to stop,” and that AMC will ask the SEC “how can the SEC possibly support your sham ignoring of U.S. securities laws.”

Half an hour later he amplified an AMC shareholder account that had told Tenev the concern is “offering synthetic exposure to 190+ public companies’ stock without registering these as securities,” and that “‘Tokenized’ doesn’t exempt you from the Securities Act.”

Dan Gallagher, Robinhood’s chief legal, compliance and corporate affairs officer and an SEC commissioner from November 2011 to October 2015, answered at 10:16 a.m. ET Friday, quoting the typo: “We know a little something about the U.S. securities laws and will not ‘DECIST.’ Send your lawyers and we’ll educate them.” Tenev quoted that a minute later with “We stand behind Stock Tokens.”

AMC has filed nothing with the SEC on the dispute. Its most recent company filing is the 10-Q for the quarter ended June 30.

Eighteen Dollars At Midnight

With the NYSE shut and the post circulating, the token stopped tracking the stock. In the deepest pool, AMC against Global Dollar on Uniswap, the price opened the 11 p.m. ET hour at $2.54, the exact NYSE close, and printed a high of $18.04 inside that hour on $10.2 million of volume, GeckoTerminal records show. It reached $6.13 in the 2 a.m. ET hour and held above $4 through the 3 a.m. hour, then fell through the pre-market to $2.75 in the hour before the NYSE open.

By late morning the token was trading within a cent of the share price it references.

Minting Into The Premium

The premium closed because Robinhood’s issuance path expanded the float. In the two earlier episodes on the chain, the float stayed where it was.

The token at 0x05a3d1Cd21d0C88145E82600E62e7E496e0F222B, which returns the name “AMC Entertainment • Robinhood Token,” had 157,844 tokens outstanding at 5 p.m. ET Thursday, minutes before Aron’s first post. It has 1,499,255 now, according to Transfer logs and totalSupply calls read from the Robinhood Chain RPC. The contract has 697 mint events and 36 burns in its history; 175 of those mints, creating 1,493,705 tokens, landed in the past 24 hours. Supply passed 791,694 by 2 a.m. ET and 1.25 million by 5 a.m. ET, tracking the decay in the premium.

Only one firm can do that. Stock tokens are “tokenised debt securities issued by Robinhood Assets (Jersey) Limited,” and “only Authorised Participants (at issuance, the only Authorised Participant is BBVI) may subscribe for Stock Tokens directly from RHJ after KYB onboarding,” Robinhood’s developer documentation states.

When a memecoin cornered the tokenized Hims & Hers float in late August, the float stayed at 58,714 tokens and the tokenized stock printed four and a half times the NYSE price over a weekend. The FAMI token that traded against a memecoin called Money Mushroom on Wednesday had two mint events, both inside its deployment transaction, and no issuer at all. AMC’s float is 1.5 million tokens against 892,604,638 shares outstanding as of July 22, per the 10-Q cover page: one token for every 600 shares.

A Mad CEO

At least 23 memecoins opened pools against the AMC stock token after Aron’s first post, DEX Screener records show. Their names spell the ticker: A Meme Coin, A Meme Cat, A Mad CEO, Aron Musk Cohen, Ape Meme Coins, AMC Coin, CinemaMemeAsset, A Meme Hood.

The largest, A Meme Coin, trades as MEME and had a $65.2 million market capitalization at 11:14 a.m. ET, up 288% over 24 hours on $141.4 million of volume across 30 pools, more than the roughly $83 million of AMC shares that had changed hands on the NYSE by that point. Its entire one billion supply was minted in a single transaction at 4:30 p.m. ET Thursday and has not changed since. Its first pool went live at 5:28 p.m. ET, ten minutes after Aron’s post, and its second-deepest pairing is against the AMC stock token itself, holding $2.9 million of liquidity.

A separate token also called A Meme Coin, ticking as AMC, opened a pool against the stock token at 11:28 p.m. ET, 17 minutes after Tenev’s reply. It has turned over $10.1 million across 104,976 trades.

Economic Exposure Only

Robinhood’s disclosures address several of Aron’s claims directly. The tokens “provide economic exposure to underlying securities but do not grant investors any legal or beneficial rights in, or against the issuer of, those underlying securities,” the stock tokens page states, alongside the claim that “every single Stock Token in circulation is backed 1:1 by the corresponding underlying equity.” Dividends are reinvested into an increased multiplier rather than paid out. Voting is not addressed.

The registration point Aron raised is Robinhood’s own language. Stock tokens “have not been and will not be registered under the U.S. Securities Act of 1933,” may not be sold “to, or for the account or benefit of U.S. Persons,” and the issuer “is not regulated,” with Jersey consents that “do not constitute prudential supervision of the Issuer or an endorsement of its products,” according to the RHJ disclosure page Aron quoted. Neither company has said how those restrictions are enforced against wallets trading the tokens on a permissionless chain.

Robinhood launched the chain’s mainnet on July 1 as infrastructure for tokenized securities. It passed Solana in tokenized stock volume via memecoin pairs in late July, overtook Base on daily active users three weeks after launch and topped Ethereum in daily app revenue on Aug. 29. Total value locked stands at $839.0 million with $1.69 billion of 24-hour DEX volume and $16.5 million of 24-hour fees, according to DefiLlama.

Stock data via Nasdaq at 11:14 a.m. ET. Onchain figures via DEX Screener, GeckoTerminal and the Robinhood Chain RPC at 11:14 a.m. ET on Sept. 4.