Stock trading platform Robinhood Markets must face market manipulation claims over restrictions it placed on trading during last year’s “meme stock” rally, a US judge has ruled.
US District Court Judge Cecilia Altonaga in Miami said in the ruling that investors in GameStop, AMC Entertainment Holdings and seven other stocks can proceed with a proposed class-action lawsuit alleging the restrictions artificially increased the stocks’ supply.
The lawsuit was one of several cases brought against the retail trading platform after it temporarily barred customers from buying certain hot stocks in January 2021, including GameStop and AMC.
Shares of those companies surged to extreme highs thanks to a social media-fueled rally that eventually led Robinhood and others to restrict trading in the affected securities, infuriating retail investors and rattling market confidence. The volatility caused major losses for hedge funds that had bet against the meme stocks.
In a statement, Robinhood’s associate general counsel of litigation and regulatory enforcement, Cheryl Crumpton, said the company continues to stand by its actions, which it believes were “appropriate and necessary to support our customers.”
“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 said.