Robinhood Close to Settling GameStop Meme Stocks Lawsuit

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Key takeaways:

  • The trading platform Robinhood is in the process of concluding a deal with investors who filed a lawsuit against it in 2021.
  • The investors’ attempt to submit a new request for class certification on April 19 was rejected by United States District Judge Cecilia Altonaga, which led to the settlement.

The trading platform Robinhood is in the process of concluding a deal with investors who filed a lawsuit against it in 2021, alleging that it stopped trading some popular stocks, such as GameStop.

Robinhood’s attorneys stated in a petition made on May 28 to a federal court in Miami that the company is “in the process of finalizing the settlement” with the investor group and anticipates a settlement and dismissal within the next two weeks. The details of the settlement were not disclosed in the filing. 

The investors, among them the principal Plaintiff Blue Laine-Beveridge, claimed that by “picking and choosing” the stocks that its customers may purchase between January 28 and February 4, 2021, Robinhood “unlawfully manipulated market prices” and “wiped out tens of billions” of dollars of investors’ equity.

As a result of Robinhood’s move, the investors claimed to have shares in GameStop, AMC, Bed Bath & Beyond, BlackBerry, Nokia, trivago, Koss, Express Inc., and Tootsie Roll.

Part of a larger litigation in several US jurisdictions concerning the company’s meme stock-related activities, the investor suit concentrated on Robinhood’s alleged violations of securities laws.

The investors’ attempt to submit a new request for class certification on April 19 was rejected by United States District Judge Cecilia Altonaga, which led to the settlement. A similar request was denied by Judge Altonaga in November of last year as well.

Some people refer to stocks like GameStop and AMC as meme stocks since a lot of ordinary investors trade them based on social media excitement.

Following a “short squeeze” of the stock, GameStop’s stock price surged dramatically in January 2021, resulting in substantial losses for hedge funds and other short sellers but huge gains for some individual traders.

In August 2023, GameStop declared that it no longer supports crypto wallets, citing unpredictability in US regulations. Only a year had passed since the business began offering the service to clients when the decision was made. On November 1, 2023, GameStop withdrew its iOS and Chrome Extension wallets from distribution.

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