Robinhood to face class action lawsuit from meme stock debacle

Cryptocurrency and stock trading platform Robinhood will allegedly face allegations of market manipulation as part of a class-action lawsuit brought by investors in “meme stocks” from nine different companies during a January 2021 rally.

United States District Court Judge Cecilia Altonaga of the Southern District of Florida ruled that investors in GameStop, AMC and seven other unnamed stocks — which may include Nokia and BlackBerry — could proceed with a lawsuit alleging that Robinhood artificially increased the supply of stocks.

In January 2021, the price of several assets, including the meme token Dogecoin (DOGE), rose to all-time highs after Redditors on r/Wallstreetbets pumped up interest in certain stocks and cryptocurrencies.

Robinhood suspended — but later resumed — buys of GME stock and others following the assets rising exponentially, putting the trading platform in the middle of a fight between retail investors and large hedge funds shorting stocks.

Following the meme stock controversy, Robinhood was sometimes the target of U.S. lawmakers looking for answers. CEO Vlad Tenev testified before a House Financial Services Committee hearing in February 2021.

Unrelated to the events around meme stocks, the New York Department of Financial Services also announced on Aug. 2 that Robinhood Crypto will pay a $30 million penalty to the state “for significant failures in the areas of Bank Secrecy Act/Anti-Money Laundering obligations.”

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