The actions of many online trading firms during the recent period of increased market volatility has resulted in a number of legal actions brought by disgruntled traders. Robinhood, to name one example, has been targeted in at least 30 lawsuits in the United States over the restrictions to stock trading it introduced last week. But Robinhood is not the single company to be held responsible.

On February 1, 2021, traders filed a class action complaint at the California Northern District Court naming 35 entities, including online brokers, clearinghouses and funds, as defendants.

Shane Chang and Terell Sterling, on behalf of themselves and all others similarly situated, brought this Class Action Complaint against the defendants for violations of Section 1 of the Sherman Act, 15 U.S.C. § 1, Section 16 of the Clayton Act, 15 U.S.C. § 26, state antitrust and consumer protection laws, and the common law.

This case is about individual investors who allegedly were stripped of the rights to control their investments due to a large, overarching conspiracy to prevent the market from operating freely.

The list of defendants includes:

• Ally Financial Inc.
• Alpaca Securities LLC
• Apex Clearing Corporation
• Barclays Bank PLC
• Cash App Investing LLC
• Charles Schwab & Co. Inc.
• Citadel Enterprise Americas, LLC
• Citadel Securities LLC
• E*Trade Financial Corporation
• E*Trade Financial Holdings, LLC
• E*Trade Securities LLC
• FF Trade Republic Growth, LLC
• Freetrade, Ltd.
• Fumi Holdings, Inc.
• IG Group Holdings PLC
• Interactive Brokers LLC
• M1 Finance, LLC
• Melvin Capital Management LP
• Morgan Stanley Smith Barney LLC
• Open to the Public Investing, Inc.
• Robinhood Financial, LLC
• Robinhood Markets, Inc.
• Robinhood Securities, LLC
• Sequoia Capital Operations LLC
• Square Inc.
• Stash Financial, Inc.
• TD Ameritrade, Inc.
• Tastyworks, Inc.
• The Charles Schwab Corporation
• The Depository Trust & Clearing Corporation
• Trading 212 Ltd.
• Trading 212 UK Ltd.
• WeBull Financial LLC
• dough llc
• eToro USA Securities, Inc.

The Retail Investors, through stock brokerages, purchased and invested in certain stocks – Gamestop (GME), AMC Theaters (AMC), American Airlines (AAL), Bed Bath & Beyond (BBBY), Blackberry (BB), Express (EXPR), Koss (KOSS) Naked Brand Group (NAKD), Nokia (NOK), Sundial Growers Inc. (SNDL), Tootsie Roll Industries (TR), and Trivago NV (TRVG) – that they believed would grow, increase in price and serve as good investment opportunities.

Several large hedge funds and investment firms, including Citadel Enterprise Americas LLC, Citadel Securities LLC, Melvin Capital Management LP, and unnamed co-conspirators, acquired and possessed massive “short” positions in the Relevant Securities.

The Fund Defendants and other unnamed co-conspirators made short selling investments in the Relevant Securities. In so doing, they made highly speculative bets. When the Relevant Securities increased in value, due in large part to Retail Investors purchasing the Relevant Securities and increasing stock prices, the Fund Defendants, Clearinghouse Defendants and unnamed co-conspirators were exposed to potential losses of several billion dollars.

As Retail Investors and others continued to purchase the Relevant Securities, the Fund Defendants, Clearinghouse Defendants and unnamed co-conspirators were caught in a classic “short squeeze.”

The Brokerage Defendants, Fund Defendants and Clearinghouse Defendants allegedly conspired to prevent the Retail Investors from buying any further stock and forcing Retail Investors to sell their Relevant Securities to artificially suppress stock prices of the Relevant Securities. On January 27, 2021, after the close of the stock market and before the open of the market the next day, the Fund Defendants coordinated and planned increased short volumes in anticipation of short calls on January 28, 2021.

The Brokerage Defendants – that operate through websites and mobile applications – disabled all buy features on their platforms and thereby left the Retail Investors with no choice but to sell or hold their rapidly dwindling stocks. The Brokerage Defendants did so to ensure that the stock prices for the Relevant Securities go down in furtherance of the conspiracy. Other Brokerage Defendants displayed loading graphics on the landing pages for these Relevant Securities to prevent users from purchasing any more Relevant Securities.

Plaintiffs and Class members, faced with an imminent decrease in the price of their positions in the Relevant Securities due to the inability of Retail Investors to purchase shares, were induced to sell their shares in the Relevant Securities at a lower price than they otherwise would have.

Additionally, Class members that would have purchased more stock in the Relevant Securities given the upward trend in price could not do so.

By doing so, the Defendants and their co-conspirators forced Retail Investors to choose between selling the Relevant Securities at a lower price or holding their rapidly declining positions in the Relevant Securities. According to the allegations, the defendants did so to drive the price of the Relevant Securities down.

The traders accuse the defendants and their co-conspirators of conspiring to prevent the Retail investors from buying further stock in order to mitigate the Fund Defendants’ exposure in their short positions. By forcing the Retail Investors to sell their Relevant Securities at lower prices than they otherwise would have, the defendants are said to have artificially reduced the value of the Relevant Securities that Retail Investors either sold or held on to.

The plaintiffs bring this action on their own behalf as well on behalf of the members of the Class to recover damages, including treble damages, costs of suit, and reasonable attorneys’ fees arising from the defendants’ violations of Section 1 of the Sherman Act, 15 U.S.C. § 1, Section 16 of the Clayton Act, 15 U.S.C. § 26.