Robinhood will have to face U.S. marketplace manipulation claims over 'meme inventory' rally, pass judgement on laws

Stock buying and selling platform Robinhood Markets Inc will have to face marketplace manipulation claims over restrictions it put on buying and selling all over final yr’s “meme stock” rally, a U.S. pass judgement on dominated on Thursday.

U.S. District Court Judge Cecilia Altonaga in Miami stated within the ruling that traders in GameStop Corp, AMC Entertainment Holdings Inc and 7 different shares can continue with a proposed elegance motion lawsuit alleging the constraints artificially depressed percentage costs.

The lawsuit was once one in every of a number of instances introduced in opposition to the retail buying and selling platform after it briefly barred consumers from purchasing sure sizzling shares in January 2021, together with GameStop and AMC.

Shares of the ones corporations surged to excessive highs because of a social media-fueled rally that at last led Robinhood and others to limit buying and selling within the affected securities, infuriating retail traders and damn marketplace self assurance. The volatility brought about main losses for hedge finances that had guess in opposition to the meme shares.

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Robinhood had got rid of its customers’ skill to shop for sure shares for an afternoon when its clearinghouse necessities ballooned to a $3 billion call for for money – a duty set through the National Securities Clearing Corporation. The brokerage additionally briefly restricted the selection of stocks customers may just purchase in some sizzling shares.

Judge Altonaga oversees a sprawling set of proceedings alleging Robinhood and others violated U.S. rules of their reaction to the social media-driven rally.

She up to now disregarded claims that the corporate and different brokerages illegally conspired to halt a “short squeeze” that was once inflicting billions of greenbacks of losses for hedge finances that have been having a bet on falling inventory costs. The pass judgement on additionally disregarded retail traders’ claims that Robinhood was once negligent and breached its responsibility to consumers.

In the ruling printed Thursday, the pass judgement on denied Robinhood’s movement to disregard separate allegations that it engaged in marketplace manipulation to artificially depress the costs of the 9 shares through canceling acquire orders, liquidating its consumers’ stocks and shutting out choices.

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While the constraints on my own would now not beef up a declare of marketplace manipulation, along with “opaque and conflicting statements made to hide its lack of capital” they “evince an intent on the part of Robinhood to artificially depress share prices for its personal benefit,” the pass judgement on wrote.

The corporate will have to additionally face the buyers’ declare that the alleged manipulation violated a federal statute prohibiting securities fraud, the ruling stated.

The pass judgement on alternatively disregarded a declare that the brokerage engaged in marketplace manipulation to urge traders to promote their stocks.

In a remark, Robinhood’s affiliate common suggest of litigation and regulatory enforcement, Cheryl Crumpton, stated the corporate continues to face through its movements, which it believes have been “appropriate and necessary to support our customers.”

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“The court has not yet made any findings of fact or ruled on the merits — and we will continue to vigorously defend ourselves in this matter,” Crumpton stated.

(Reporting through Jody Godoy in New York and Hannah Lang in Washington; enhancing through Jonathan Oatis, Leslie Adler and Aurora Ellis)