Robinhood, traders fail to reach agreement in short squeeze litigation
The legal proceedings targeting Robinhood over its actions during the January 2021 short squeeze continue at the Florida Southern District Court.
The parties in the multi-district litigation have provided a report on the mediation status. The document was filed with the Court on May 24, 2023.
On May 17, 2023, counsel for Lead Plaintiff Blue Laine-Beveridge and the plaintiffs named in the Amended Consolidated Class Action Complaint, and defendants Robinhood Markets, Inc., Robinhood Financial LLC and Robinhood Securities, LLC met for an in-person mediation session with Robert A. Meyer, Esq. of JAMS. The parties failed to reach an agreement.
This update relates to the Federal Securities Tranche of the lawsuit.
The Consolidated Class Action Complaint (CCAC) contains two claims for relief. Count I alleges that Robinhood manipulated the prices of the Affected Stocks in violation of section 9(a) of the Securities Exchange Act of 1934. Count II alleges an identical theory, but it relies on section 10(b) and rule 10b-5 promulgated thereunder.
- Count I contains two subclaims under sections 9(a)(2) and 9(a)(4), respectively. Plaintiffs allege that Robinhood violated section 9(a)(2) by intentionally manipulating the market to artificially depress the prices of the Affected Stocks. As for section 9(a)(4), Plaintiffs allege that Robinhood misstated or omitted material facts to mislead investors into thinking that it did not have a liquidity problem — a problem that would cause Robinhood to lose investors, customers, money, and relatedly, the chance at a lucrative initial public offering.
- Count II alleges that Robinhood manipulated the market when it (1) raised margin requirements (2) canceled purchase orders for the Affected Stocks, (3) closed out options in AMC and GME early, and (4) prohibited and restricted purchases of the Affected Stocks on its platform. These actions allegedly “created a false impression of actual demand for the Affected Stocks” and “artificially increased supply of the Affected Stocks.
In August 2022, the Court partially dismissed the complaint but left the bulk of the claims to which Robinhood had to respond.
On September 12, 2022, Robinhood Markets, Inc., Robinhood Financial LLC and Robinhood Securities, LLC filed their answer to the Consolidated Class Action Complaint filed by Lead Plaintiff Blue Laine-Beveridge and 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, and asserted their affirmative and other defenses.
Overall, Robinhood denies each and every allegation contained in the Complaint, including, without limitation, the Table of Contents, headings, sub-headings, footnotes and non-numbered paragraphs contained in the Complaint. Robinhood’s answer also included 22 affirmative defenses.