Stock traders affected by the January 2021 short squeeze have slammed Robinhood for its information requests as the multi-district litigation targeting the company continues at the Florida Southern District Court.

Last week, Robinhood Markets, Inc., Robinhood Financial LLC and Robinhood Securities, LLC submitted Discovery Memorandum regarding Robinhood’s Set of Requests for Production directed to Plaintiffs in the federal securities tranche of the multi-district litigation. The parties have reached an impasse on three requests.

• The first request seeks “all Documents, Communications or Social Media Posts concerning Robinhood or this Action.”
• The second request seeks “documents sufficient to identify each of plaintiffs’ holdings, investments, and transactions in any securities other than the Relevant Securities during the Relevant Time Period.”
• The third request seeks certain schedules to Plaintiffs’ income tax returns for the most recent three years.

According to the plaintiffs, the relief Robinhood seeks should be denied.

The traders say:

“Robinhood claims to have “democratized finance” by empowering individual investors. Yet it seeks to probe every trade, every word uttered, and three years of tax returns, in the hope of finding something that might convince the Court that retail traders should not be empowered as class representatives to hold Robinhood to account to injured investors for its market manipulation”.

The plaintiffs argue that, while documents that date from after the trading restrictions were lifted appear to be of little to no relevance, they have nevertheless agreed to expand the period by three months, to June 5, 2021. Robinhood, which has argued that none of its documents dating after March 5, 2021, have any relevance to the case, has not articulated any reasonable basis for the production of documents and statements made by a dozen retail investors during the past 21 months, more than two years after the events at issue and their Class Period trades occurred.

The traders say it is clear that Robinhood does not really care about the information in Plaintiffs’ tax returns. Rather, the Request is designed to harass and intimidate the twelve retail investor Plaintiffs. They say that ratther than highly-generalized and non-applicable justifications concerning losses and tax treatments, Robinhood has articulated no real reason why it wants this information.

The plaintiffs conclude that “Robinhood’s intrusive fishing expedition for documents of dubious relevance – information it was (conditionally) willing to forego entirely – should be denied”.

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.

The Discovery Hearing previously set for March 3, 20233 has been reset for March 10, 2023 at 11:30 A.M. in the Miami Division before Magistrate Judge Melissa Damian.