A US judge dismissed a lawsuit accusing Robinhood Markets and other brokerages of wrongly preventing retail investors from buying fast-rising “meme stocks,” triggering a sell-off.
In a decision on Wednesday, Chief Judge Cecilia Altonaga of the federal court in Miami found no proof of an illegal conspiracy to cut off social media-fuelled trading of GameStop Corp, AMC Entertainment Holdings Inc, Bed Bath & Beyond Inc and six other stocks.
Investors in the proposed class action said the brokerages and Citadel Securities LLC colluded to halt a “short squeeze” that was causing billions of dollars of losses for Citadel and hedge funds that were betting on falling stock prices.
The investors said the late January trading curbs left them “no option” but to sell at plummeting prices.
But Altonaga said in her 51-page decision that the investors fell “far short” of providing direct evidence of an antitrust conspiracy, despite emails among senior Robinhood and Citadel executives that lent “some credence” to their claims.
“(A)re a few vague and ambiguous emails between two firms in an otherwise lawful, ongoing business relationship enough to nudge plaintiffs’ claims across the line from conceivable to plausible?” Altonaga wrote.
“The court thinks not.”
Altonaga also dismissed related claims against E*Trade Financial Corp and four other defendants.
Frank Schirripa, a lawyer for the investors, said on Thursday they were disappointed but expected to amend their complaint in the next few weeks.
Robinhood said in a statement: “This further confirms that the conspiracy theory of collusion has no basis in fact.”
Citadel said it was pleased with the decision. E*Trade declined to comment. A separate proposed class action accuses Robinhood of negligence.
The meme stock frenzy has been fuelled by investors using online forums such as Reddit and Twitter.
Many traded from home because of the COVID-19 pandemic, through brokerages that had eliminated trading commissions.
Last month, the US Securities and Exchange Commission said in a report that markets essentially worked well during the volatility. The regulator did not suggest policy changes.
The case is In re January 2021 Short Squeeze Trading Litigation, US District Court, Southern District of Florida, No. 21-md-02989.
The team at Platform Executive hope you have enjoyed the ‘Robinhood, others win dismissal of meme stock ‘short squeeze’ lawsuit‘ article. Automatic translation from English to a growing list of languages via Google AI Cloud Translation. Initial reporting via our official content partners at Thomson Reuters. Reporting by Jonathan Stempel in New York. Additional reporting by John McCrank. Editing by Jonathan Oatis.
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