A group of traders and Robinhood have reached a settlement regarding the Federal Securities Tranche of the January 2021 short squeeze lawsuit.
On May 28, 2024, Robinhood Markets, Inc., Robinhood Financial LLC, and Robinhood Securities, LLC and Plaintiffs Blue Laine-Beveridge, Abraham Huacuja, Ava Bernard, Brendan Clarke, Brian Harbison, Cecilia Rivas, Doi Nguyen, Joseph Gurney, Marcel Poirier, Sandy Ng, Santiago Gil Bohórquez, and Thomas Cash provided notice to the Court that the Parties have reached a settlement of Named Plaintiffs’ claims within the Federal Securities Tranche.
The Parties are in the process of finalizing the settlement, after which the Parties will stipulate to dismissal with prejudice. The Parties anticipate that settlement and dismissal will be finalized within the next 14 days.
In light of their settlement, the Parties request the Court to stay all proceedings in the Federal Securities Tranche.
The Consolidated Class Action Complaint (CCAC) in this lawsuit contains two claims for relief. Count I alleges that Robinhood manipulated the prices of the Affected Stocks in violation of section 9(a) of the Securities Exchange Act of 1934. Count II alleges an identical theory, but it relies on section 10(b) and rule 10b-5 promulgated thereunder.
- Count I contains two subclaims under sections 9(a)(2) and 9(a)(4), respectively. Plaintiffs allege that Robinhood violated section 9(a)(2) by intentionally manipulating the market to artificially depress the prices of the Affected Stocks. As for section 9(a)(4), Plaintiffs allege that Robinhood misstated or omitted material facts to mislead investors into thinking that it did not have a liquidity problem — a problem that would cause Robinhood to lose investors, customers, money, and relatedly, the chance at a lucrative initial public offering.
- Count II alleges that Robinhood manipulated the market when it (1) raised margin requirements (2) canceled purchase orders for the Affected Stocks, (3) closed out options in AMC and GME early, and (4) prohibited and restricted purchases of the Affected Stocks on its platform. These actions allegedly “created a false impression of actual demand for the Affected Stocks” and “artificially increased supply of the Affected Stocks.
In August 2022, the Court partially dismissed the complaint but left the bulk of the claims to which Robinhood had to respond.
