Online stockbrokers pulled the plug on retail investors backing highly-traded stocks on Thursday, provoking scrutiny from politicians and anger from users who accused the companies of favouring Wall Street funds.

A string of trading services including Robinhood and e-Trade restricted investments in popular shares including GameStop and cinema chain AMC, leading to widespread criticism from a coalition including Elon Musk, the world's richest man, and Alexandria Ocasio-Cortez, the left-wing Congresswoman.

Mr Musk tweeted that popular fee-free trading apps were "beholden to big trading houses", while Ms Ocasio-Cortez demanded answers about why retail investors were blocked from trading while major institutions continued to be able to trade.

Trading apps stopped users from making investments in a range of popular stocks that have found favour on online investing communities, blaming high volatility and, in some cases, being cut off from partners that execute trades on their behalf.

Although the apps promised to resume service, the changes led to wild swings in the value of popular stocks such as GameStop. Shares in GameStop, which have skyrocketed in recent days as retail investors have pushed the app in a campaign against short sellers, fell 44pc before surging 35pc in after-hours trading. AMC fell 57pc before rebounding by 26pc.

Late on Thursday, Robinhood said it would resume trading, saying it had stopped purchases of some investments due to financial requirements.

"Amid this week’s extraordinary circumstances in the market, we made a tough decision today to temporarily limit buying for certain securities. As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits," it said.

Earlier in the day, Robinhood users sued the trading app, which has more than 13m users, claiming it had manipulated the market.

Despite the losses, fund managers are sitting on huge gains in companies such as GameStop, which has surged from a share price of just over $17 at the start of the year to a closing high of $346.37 on Wednesday before Thursday's drop.

Ryan Cohen, the founder of Chewy.com and an activist shareholder in GameStop, bought a 13pc stake for $76m in December that was worth more than $2bn even after Thursday's slump.

Tyndall Investment Management, a fund founded by former Jupiter fund manager Alex Odd, snapped up 80,000 shares in total in December and early January. It sold its final shares on January 26.

Traders, public figures and high-profile politicians reacted with fury at brokers’ decisions to cut off trading. Many services including Robinhood continued to allow investors to sell their positions.

Trading212, a London-based broker favoured by younger investors, blocked customers from opening new bets on GameStop, eToro said it was no longer allowing customers to borrow to maximise their bets on 150 stocks, including GameStop, while spread-betting sites IG and CMC Markets implemented similar restrictions.

Several trading services said they had been forced to stop trading by Apex Holdings, a clearing firm that executes trades. Others, including Robinhood, blamed “market volatility”.

“We now need to know more about [Robinhood’s] decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit,” Ms Ocasio-Cortez tweeted. Republican Senator Ted Cruz, a frequent political opponent, responded, “Fully agree.”

Mr Musk, the Tesla chief executive and world’s richest person, tweeted “absolutely”, adding that, “shorting is a scam” in reference to short sellers who have bet against popular stocks.

Nigel Farage, the Reform party leader who has recently adopted a sideline in investment advice, said the restrictions were “outrageous”. “It shows that big money, big politics and the regulators are all in bed together and against the little guy,” he tweeted.

The US Senate’s banking committee said it would hold a hearing into the “current state of the stock market”. Incoming committee chairman Sherrod Brown said: “People on Wall Street only care about the rules when they’re the ones getting hurt.”

In a lawsuit filed in Chicago, Robinhood user Richard Gatz claimed that Robinhood's restriction “was to protect institutional investment at the detriment of retail customers” and accused Robinhood of being in a “lockstep” with fellow trading apps.

“A lot of retail interest in stocks is ideal for a company like Robinhood, so to make a decision like this is only going to frustrate clients and risk turning them against you, said Craig Erlam, senior market analyst at Oanda. “It’s a very bold decision and people will demand to know why.”

Robinhood did not respond to a request for comment on the lawsuit. Apex Holdings did not respond to a request for comment on why it had restricted trading.