Robinhood hit with another class action complaint over short squeeze
The traders caught up in the January short squeeze have filed one more complaint against Robinhood. The complaint adds to a set of other complaints against the online trading company which is among the defendants in the multi-district litigation targeting a number of brokers, clearing houses and hedge funds.
In fact, Robinhood is already a defendant in the antitrust tranche, as well as the Robinhood tranche of the litigation that concerns the short squeeze. On Tuesday, November 30, 2021, Robinhood was hit with another complaint.
The document, seen by FX News Group, represents a consolidated class action complaint, which relates to all actions against Robinhood involving the Federal Securities Laws. This means that all of those nearly 50 cases that alleged Robinhood violated Federal Securities Laws are now consolidated in this complaint. These allegations come on top of the allegations that Robinhood conspired with Citadel and that Robinhood breached its fiduciary duties.
The new complaint is brought by Lead Plaintiff Blue Laine-Beveridge, named Plaintiffs Abraham Huacuja, Ava Bernard, Brandon Martin, Brendan Clarke, Brian Harbison, Cecilia Rivas, Garland Ragland Jr., Joseph Gurney, Santiago Gil Bohórquez, and Trevor Tarvis against defendants Robinhood Markets, Inc. and two of its wholly owned subsidiaries, Robinhood Financial, LLC and Robinhood Securities, LLC.
This is a class action on behalf of persons or entities who held common stock in AMC Entertainment Holdings, Inc., Bed Bath & Beyond Inc., BlackBerry Ltd., Express Inc., GameStop Corp., Koss Corp., Tootsie Roll Industries Inc., or American Depositary Shares of foreign-issuers Nokia Corp., and trivago N.V. as of the close of trading on January 27, 2021, and sold such shares at a loss between January 28, 2021, and February 4, 2021.
According to the traders, Robinhood’s actions were unique among retail brokers.
The plaintiffs claim that only Robinhood halted trading and/or restricted purchases and/or holdings of multiple stocks for more than a single trading session – January 28th – extending some of its restrictions for six trading sessions, through February 4th.
On January 29th, when other retail brokers had already removed any share purchasing restrictions in force on January 28th, Robinhood increased the number of issuers subject to restrictions – from 13 to 23 to 50 – and did not limit the issuers affected to so-called “meme stocks”, ultimately including Starbucks and General Motors.
On January 29th, Robinhood reduced the number of shares a customer could purchase and hold in various issuers multiple times over the course of a single trading session, causing price declines in the market prices of those stocks in the wake of those restrictions.
The complaint alleges that even after raising a $3.4 billion capital cushion against the risk of unsettled positions in its portfolio, Robinhood slowly released its restrictions over the course of the trading week to avoid a repeat of the price rebound on January 29th that Robinhood actively tamped down with its additional restrictions.
According to the complaint, Robinhood’s singular actions distorted the prices of the Affected Stocks for more than a week because of its domination of the online retail brokerage industry. Robinhood, which claims to have opened nearly 50% of all retail brokerage accounts in the past five years, boasted an industry-leading 12.5 million online accounts by the end of 2020 and added another 3 million during the month of January 2021. By one estimate, approximately 4% of all shares traded in the U.S. in January 2021 were traded on the Robinhood app.
By completely shutting down, initially, and later restricting, the demand side of the equation for the nine Affected Stocks in the accounts of more than 15 million very active traders, for days rather than just minutes, Robinhood unlawfully manipulated market prices for the Affected Stocks, the complaint says.
The plaintiffs accuse Robinhood of violations of Section 9(a) of the Exchange Act and of violations of Section 10(b) of the Exchange Act and Rule 10b-5.
The plaintiffs seek, inter alia, awarding damages in favor of the plaintiffs and the other Class members against all defendants, jointly and severally, together with interest thereon.