Class Action Lawsuit Moves Ahead Against Robinhood Over Meme Stock Trading Halt

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A federal judge ruled Thursday that Robinhood must defend itself in court against a class action lawsuit related to the online brokerage’s January 2021 decision to halt trading in explosive “meme stocks” like AMC and GameStop, multiple sources reported Thursday. outlets, though Robinhood vows to “vigorously defend itself” in the case.

Highlights

U.S. District Chief Judge Cecilia Altonaga says Robinhood’s decision to temporarily ban the purchase of booming stocks like AMC, Bed Bath & Beyond, and GameStop erases the “particular threshold” of “market manipulation.” market” for the prosecution to proceed. Court for the Southern District of Florida, Bloomberg reported.

Altonaga dismissed several of the allegations against Robinhood, according to Bloomberg, and noted that the case presented “interesting legal issues, complicated by the novelty of Robinhood’s platform.”

The lawsuit was brought by investors in the nine actions stopped, according to Reuters.

Robinhood continues to support its decision as the meme stockpile frenzy represented “an extraordinary, once-in-a-generation event that tested all market stakeholders,” said Robinhood associate general counsel Cheryl Crumpton. responsible for litigation and regulatory enforcement, in a press release. Forbes.

crucial quote

Robinhood plans to “vigorously defend itself” in the lawsuit, Crumpton said in the statement, explaining, “We continue to maintain our actions during this time, which we believe are appropriate and necessary to protect and support our customers.”

Key context

Robinhood blocked the purchase of several stocks whose price soared supported by a rally from Reddit’s WallStreetBets community on January 28, 2021, citing market volatility, but allowing clients to sell their positions in the affected stocks. GameStop shares rose around 1,700% in January 2021, while AMC shares jumped around 840% during the period. Robinhood’s decision to partially halt trading was met with an intense bipartisan backlash, leading to several class action lawsuits. The company has paid $165 million to government agencies since 2020 due to penalties for misleading customers and failing to meet compliance regulations. Robinhood’s stock is down more than 70% from its initial public offering price last July, although it has risen more than 10% in the past month.

Further reading

Robinhood is facing anger, class action lawsuits and political backlash after it curbed GameStop’s trade (Forbes)

Report: Outraged traders besieged Robinhood headquarters (Forbes)

Robinhood’s crypto arm hit with $30 million fine by state regulator (Forbes)

The WallStreetBets founder explains why the group sparked chaos on GameStop and why he’s (really) exiled from Reddit (Forbes)

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