Court Rejects Class Certification Request Against Robinhood in GameStop Meme Case
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A US District Court for the Southern District of Florida has ceremoniously rejected the requests for class certification by investors who have taken legal action against the Robinhood platform.
Making her decision known in a court document on November 13, Chief Judge Cecilia Altonaga said that after a close examination of the presented documents and relevant laws on such matters, the prosecutors’ motion could not be admitted.
Judge Altonaga clarified that the refusal stems from the investors’ inability to demonstrate to the court that concerns related to relying on individualized approaches to allegations of market manipulation against the stock-trading platform wouldn’t be widespread or common.
Individualized approaches or issues often lead to hindrances down the line, making it impossible for a proper legal procedure to be executed. In most cases, such issues are often struck out from the onset to prevent any lengthy court procedure in the future.
Judge Altonaga stated that the case meets the merits of coming under a class treatment. However, it could not properly convince the court that individualized approaches would not be common.
The case began in 2021 following the infamous short squeeze event that rocked Wall Street during that time.
A community of Redditors banded together and bought up stocks of struggling companies like GameStop, AMC Entertainment, Nokia, Blackberry, and others, leading to the meme stock frenzy of the time.
These businesses were projected to underperform in their fiscal revenue, and several hedge funds shorted their stocks.
Given the significant purchases by retail investors influenced by the WallStreetBets sub-reddit community, the prices of these stocks surged hundreds of dollars.
GameStop stock, for instance, rallied from $53 on January 22, 2021, to $503 per share six days later. This forced several of these hedge funds to begin buying up these underperforming stocks to cover their positions.
The event saw Robinhood caught in the crossfire as many social media-fueled retail trades were executed on its platform.
To forestall a potential market fallout from liquidity dearth, regulators significantly increased the deposit requirements for clearing brokers.
The commission-free stock trading app, which offers bonds, exchange-traded funds (ETFs), options, and cryptocurrencies, was forced to limit and restrict trades executed on its platform, especially on the aforementioned meme stocks, to appease regulators.
In response, a body of investors accused the platform of market manipulation, making their claims under federal security laws.
The plaintiffs also said the retail-friendly platform released “half-truths” by not announcing it had issues with its liquidity. Robinhood Markets, Robinhood Financial, and Robinhood Securities were cited as defendants.
Robinhood Expanding Its Crypto Horizon
Although it set out to democratize investment trading in stocks and other traditional financial instruments for all, Robinhood has been gradually making headway into the crypto landscape.
According to recent reports, Robinhood is looking to expand its crypto brokerage services into the UK and the European (EU) bloc. The announcement was made in its third-quarter earnings report.
Robinhood plans to offer crypto trading in the EU and UK. https://t.co/1CUOqVmUmA
— Max Karpis (@maxkarpis) November 10, 2023
This would automatically see Robinhood compete with domestic counterparts like Coinbase, who have continued to make headway in Europe in recent months.
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