Traders drop market volatility lawsuit against eToro USA
The number of lawsuits brought by traders regarding the actions of online trading firms during the latest spike of market volatility have risen to more than a hundred. Most of these, as FNG readers might have guessed, target Robinhood. Several legal actions target dozens of companies, including brokerages and clearinghouses.
One of these lawsuits was brought by traders at the New York Eastern District Court earlier in February. The list of defendants includes more than 30 names. Now, however, this list has become shorter.
According to a notice filed with the Court on February 23, 2021, the complaint is dismissed against eToro USA Inc. The notice does not specify the reasons for the dismissal.
The Court entry states:
“PLEASE TAKE NOTICE, that Plaintiffs, by their Counsel, hereby voluntarily dismiss the above-captioned action against Defendant Etoro USA Securities, Inc. without prejudice pursuant to Rule 41(a)(1)(A)(i) of the Federal Rules of Civil Procedure. The dismissal is without costs to any party and this notice may be filed with the Clerk of the Court without further notice”.
After the removal of eToro USA Securities from the list of defendants, it includes the following names:
- 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
Let’s note that this case was brought by plaintiffs Dan Dechirico, Angel Guzman and Joshua Palmer, on behalf of themselves and all others similarly situated. The defendants are accused ofviolations 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 common law.
The class action arises from a conspiracy to deprive individual investors of their ability to invest in the open market in the midst of an unprecedent stock rise so that the defendants could shield themselves from incurring substantial losses as a result of their own high-risk short selling strategies.
The complaint alleges that, in furtherance of this conspiracy, on or about January 28, 2021, the brokerage defendants, willfully and intentionally restricted retail investors from purchasing the following securities on their websites and/or mobile applications by disabling all buy features, thereby manipulating the market:
GameStop Corp. (GME), AMC Entertainment Holdings Inc. (AMC), American Airlines Group Inc. (AAL), Bed Bath & Beyond Inc. (BBBY), BlackBerry Ltd. (BB), Castor Maritime Inc. (CTRM), Express, Inc. (EXPR), Koss Corporation (KOSS), Naked Brand Group Ltd. (NAKD), Nokia Corp. (NOK), Sundial Growers Inc. (SNDL), Tootsie Roll Industries, Inc. (TR), or Trivago N.V. (TRVG).
By conspiring to restrict retail investors from purchasing the relevant securities, the defendants allegedly created a one-way buy-sell situation thereby forcing retail investors to either hold or sell their rapidly declining stocks.
The traders say that, while the brokerage defendants placed restrictions on retail investors, no such restriction were placed on institutional investors (i.e., the fund defendants). As a result, the only entities which were permitted to purchase the relevant securities were institutional investors, many of whom were leveraged heavily “short” against the relevant securities and had a vested interest in seeing the relevant securities’ prices depressed so that they could cover their short sales at a lower cost.
As a result of the defendants’ unlawful and anticompetitive scheme, numerous retail investors (i.e., Plaintiffs and other Class members) suffered significant losses.