Investors from nine different “meme stocks” companies are filing a class-action lawsuit against crypto and stock trading platform Robinhood alleging it artificially increased the supply of stocks.
A lawsuit claiming that Robinhood artificially increased the supply of stocks may be pursued by shareholders in GameStop, AMC, and seven other unnamed stocks, according to a report from Reuters published on Thursday.
This decision was made by United States District Court Judge Cecilia Altonaga of the Southern District of Florida. After Redditors on r/Wallstreetbets stoked interest in specific equities and cryptocurrencies, the price of a number of assets, notably the meme token Dogecoin (DOGE), increased to record highs in January 2021.
Robinhood put the trading platform in the heart of a conflict between small investors and sizable hedge funds shorting stocks when it halted, then subsequently resumed, purchases of GME stock and other assets after the assets rose dramatically.
Numerous people filed several class-action lawsuits alleging that Robinhood was caving into the interests of the involved hedge funds given its connections to Citadel and Melvin Capital, and thousands of users gave the Robinhood app one-star reviews on the Google Play Store. The platform also postponed its plans for an initial public offering in the United States.
Following the uproar over the meme stock, American lawmakers occasionally focused on Robinhood in search of solutions. In February 2021, CEO Vlad Tenev gave testimony before the House Financial Services Committee.
The New York Department of Financial Services also declared on August 2 that Robinhood Crypto will pay a $30 million fine to the state “for significant failures in the areas of Bank Secrecy Act/Anti-Money Laundering obligations.” This announcement has nothing to do with the events surrounding meme stocks.
Tenev announced his intention to fire 23% of the company’s employees after the release of Robinhood’s financial results for the second quarter of 2022.
Tenev claimed that reducing the workforce by 9% in April didn’t “go far enough” to support the trading platform. Shares of HOOD are currently trading for $10.59, up more than 26% over the previous 30 days, as of the time of publication.
