Chapter Ends With Settlement, GameStop Trading Halt Lawsuit

Robinhood's 2021 Trade Halt Sparks Settlement with GameStop Investors

Robinhood is a trading platform that is almost done negotiating with investors who claimed that Robinhood denied them their potential profits when the company halted trading of some meme stocks including GameStop in January 2021. This action that was taken during a very sensitive period has been the subject of much legal debate.

What’s The News

In January 2021, stocks like GameStop and AMC had a surge in price due to a short squeeze that was led by retail investors on the social media platform, Reddit. These investors aimed at raising the stock prices and thus, many hedge funds that had placed their bets against (shorted) these stocks suffered a significant loss. The movement was led by individuals such as Keith Gill, who is also known by his online alias Roaring Kitty.

When the prices of these stocks surged, Robinhood restricted the trading of these high-risk stocks from 28th January to 4th February 2021. This decision was not well received by the investors who accused Robinhood of market manipulation. They accused Robinhood of manipulating the market by halting the trading of these stocks and causing a lot of damage in the form of monetary loss to retail investors. In the case of the claimants, Robinhood’s actions were described as “unlawful and deceptive,” which led to the loss of “tens of billions of dollars of investors’ wealth.”

The case is brought by investors who had invested in shares of not only GameStop but also other companies such as AMC Entertainment Holdings, Bed Bath & Beyond, BlackBerry, Nokia, trivago, Koss, Express, and Tootsie Roll Industries which were also affected by the Robinhood trading platform.

Robinhood's Settlement with GameStop Investors

As reported, on 28th May Robinhood’s lawyers provided the Miami federal court with a document that stated that the company is currently in the process of reaching an agreement with the investors. It is expected that the settlement of the case will be completed and the case will be closed within the next two weeks. But the specifics of the settlement have not been revealed and neither Robinhood nor the attorneys for the plaintiffs have provided statements on the issue.

On April 19, this move toward settlement came after U. S. District Judge Cecilia Altonaga dismissed the investors’ application to file a new motion for class certification. This was similar to another denial made in November of the previous year, which frustrated the investors’ attempts to move forward as a class action lawsuit.

Conclusion

As per CoinGabbar, the meme stock phenomenon of the past year especially the GME case, demonstrated the power of small investors and social networks in the stock market. However, the episode also attracted much attention and legal issues as some traders made huge profits. The events that took place after Robinhood decided to stop trading some stocks led to controversy and lawsuits with accusations of market manipulation and unfair trading. Further details of the settlement may reveal more information on the consequences of trading platforms and the actions to be taken against them in the future.

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