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Robinhood, others win dismissal of meme stock lawsuit

Posted On: Nov. 30, 2021 10:34 AM CST


(Reuters) — A U.S. judge dismissed a lawsuit accusing Robinhood Markets Inc. and other brokerages of wrongly preventing retail investors from buying fast-rising “meme stocks,” triggering a sell-off.

In a decision Wednesday, Chief Judge Cecilia Altonaga of the federal court in Miami found no proof of an illegal conspiracy to cut off social media-fueled trading of GameStop Corp., AMC Entertainment Holdings Inc., Bed Bath & Beyond Inc. and six other stocks.

Investors in the proposed class action said the brokerages and Citadel Securities LLC colluded to halt a “short squeeze” that was causing billions of dollars of losses for hedge funds that were betting on falling stock prices.

The investors said the late January trading curbs left them “no option” but to sell at plummeting prices.

But Judge Altonaga said in her 51-page decision that the investors fell “far short” of providing direct evidence of an antitrust conspiracy, despite emails among senior Robinhood and Citadel executives that lent "some credence" to their claims.

“(A)re a few vague and ambiguous emails between two firms in an otherwise lawful, ongoing business relationship enough to nudge plaintiffs' claims across the line from conceivable to plausible?” Judge Altonaga wrote. “The court thinks not.”

Judge Altonaga also dismissed related claims against E*Trade Financial Corp. and four other defendants.

Frank Schirripa, a lawyer for the investors, said Thursday they were disappointed but expected to amend their complaint in the next few weeks.

Robinhood said in a statement: “This further confirms that the conspiracy theory of collusion has no basis in fact.”

Citadel said it was pleased with the decision. E*Trade declined to comment.

A separate proposed class action accuses Robinhood of negligence.