Robinhood Markets (NASDAQ: HOOD) will have to address market manipulation claims related to the meme stock rally of 2021, when the retail trading platform temporarily prevented users from buying popular stocks such as GameStop and AMC Entertainment.
A Miami judge on Thursday decided that a class action lawsuit filed by investors of GameStop, AMC, and several other popular meme stocks can proceed against Robinhood, alleging that the trading platform artificially manipulated share prices after temporarily restricting traders from purchasing the stocks in question. The judge also refused Robinhood’s motion to dismiss other market manipulation allegations related to the meme stock frenzy, such as purposefully stopping purchase orders, liquidating users’ shares and closing out options.
The judge acknowledged that while the trading restrictions Robinhood enacted alone would not be considered market manipulation, when combined with “opaque and conflicting statements made to hide its lack of capital,” they, “evince an intent on the part of Robinhood to artificially depress share prices for its personal benefit.” As a result, the company now has to face the lawsuit’s claim that the supposed manipulation breached a federal statute prohibiting securities fraud.
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Robinhood, in response, said that it will stand by the actions it took at the time, which the company believes were “appropriate and necessary to support our customers.”
Information for this briefing was found via Reuters. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
