A Robinhood class-action lawsuit is reportedly waiting to be filed by investors in “meme stocks” from nine different companies during January 2021 rally. The crypto exchange is allegedly facing market manipulation allegations.
After Redditors on r/Wallstreetbets fueled interest in specific stocks and cryptocurrencies, the price of a number of assets, notably the meme token Dogecoin (DOGE), increased to record highs in January 2021.
AMC, GameStop & more prepare Robinhood class-action lawsuit
AMC, GameStop, and seven other unnamed stocks may proceed with a lawsuit against Robinhood, it was decided on Thursday, according to a Reuters report citing United States District Court Judge Cecilia Altonaga of the Southern District of Florida. The lawsuit claims that Robinhood artificially increased the supply of stocks.
Following the assets’ exponential rise, Robinhood stopped buying GME stock and other assets, putting the trading platform amid a conflict between small investors and sizable hedge funds shorting stocks.
Scores of people filed several class-action lawsuits alleging that Robinhood was caving into the interests of the hedge funds given its connections to Citadel and Melvin Capital. Thousands of users gave the Robinhood app one-star reviews on the Google Play Store. The platform also postponed its plans for an initial public offering in the US.
Under pressure
Following the scandal around the meme stock, US legislators occasionally targeted Robinhood in their search for information. In February 2021, CEO Vlad Tenev testified before the House Financial Services Committee.
The New York Department of Financial Services also declared on Aug. 2 that Robinhood Crypto will pay a $30 million fine to the state “for significant failures in the areas of Bank Secrecy Act/Anti-Money Laundering obligations.” This announcement has nothing to do with the events surrounding meme stocks.
Shares of HOOD are currently trading for $10.59, up more than 26% over the previous 30 days, as of the time of writing.