Robinhood faces class-action over market manipulation

Investors in GameStop Corp, AMC Entertainment Holdings Inc and seven other securities may file a class-action lawsuit against the online broker Robinhood for market manipulation and artificial price suppression. сообщает Reuters, citing a ruling from the Southern District of Florida.

In January 2021, Robinhood temporarily barred users from buying at the time the stock prices of several companies had surged to record highs, including meme cryptocurrency Dogecoin.

The platform was accused of a “deliberate and conscious” denial of private traders’ ability to invest. The volatility led to large losses for hedge funds that had bet on falling stock prices.

Earlier, the court had rejected claims of any collusion between Robinhood and other brokerages, as well as claims that the company violated duties to its clients.

However, in the new ruling the judge rejected the platform’s motion that artificially depressing the prices of nine stocks by canceling buy orders, liquidating, and closing options could not be considered market manipulation.

“Alongside the opaque and contradictory statements made to hide the lack of capital, [these restrictions] indicate Robinhood’s intent to artificially depress stock prices for its own benefit,” the ruling states.

The company must also prove that the alleged manipulations were not securities fraud.

The court rejected the claim that the actions were intended to induce investors to sell their shares.

Robinhood’s chief litigation and enforcement counsel, Sheryl Krampton, told Reuters that the online broker would continue to defend its position, calling all restrictions it had taken “appropriate and necessary to support customers.”

Earlier, ForkLog reported that Robinhood will pay $9.9 million to a group of clients who filed a suit against the online broker over systemic outages in its app. The plaintiffs estimated their damages at $20.4 million.

Earlier, after Robinhood’s second-quarter 2022 earnings, the company said it planned to lay off 23% of the firm’s staff.

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