Robinhood Sued in New Class Action Lawsuit
Robinhood (NASDAQ:HOOD) is being sued in a new class action lawsuit by Klafter Lesser LLP, Pessah Law Group, and PC and Chelin Law Firm in California.
The firms are seeking to represent investors who held call options on the Robinhood trading platform as of the close on January 27, 2021 to purchase any of the following stocks:
American Airlines Group Inc. (NASDAQ:AAL), AMC Entertainment (NYSE:AMC), BlackBerry Limited (NYSE:BB), Bed Bath & Beyond Inc. (NASDAQ:BBBY), GameStop Corp. (NYSE:GME), or Nokia Corporation (NYSE:NOK).
The latest Robinhood class action lawsuit alleges that on January 28, 2021, Robinhood prohibited purchases of the stocks underlying the affected options on its platform and also prohibited purchases of the exercise of the affected options, and only allowed the closing out of such positions.
The lawsuit further alleges that during the period January 29, 2021 through February 4, 2021, Robinhood imposed significant limits on any purchases and continued to prevent the exercise of the affected options on its trading platform.
Consequently, the value of the affected options dropped dramatically and remained suppressed throughout the month, causing investors to suffer big losses, says the press release.
“It is alleged that by virtue of these purchase and exercise prohibitions and limitations, Robinhood engaged in market manipulation in violation of Sections 9(a) and 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78i(a) and 78(j)(b), and Rule 10b-5 promulgated thereunder by the U.S. Securities and Exchange Commission (17 C.F.R. § 240.10b-5)).”
Investors Are Looking to Recover Losses
According to the lawsuit, Plaintiffs seek to recover damages for those holders of the Affected Options who suffered losses resulting from this alleged market manipulation.
More than two years later after the ‘meme stock’ frenzy swept the entire financial markets by a storm, and the events are still as strong as they were then.
“The game is not fair and it never has been. Individual investors, even when operating in a swarm, are destined to lose. How do I know? I helped design the game,” says ex-Citadel Data Scientist Patrick McConlogue.
Patrick McConlogue appeared on Fox Business during the ‘meme stock’ frenzy of 2021 when retail investors created one of the biggest scares in Wall Street history.
GameStop and AMC shareholders were able to create panic on Wall Street by heavily buying shares of the overleveraged shorted stocks.
As share prices soared, short sellers experienced massive losses.
GameStop was able to put Melvin Capital out of business, but Patrick McConlogue says other hedge funds were able to make back billions in losses during the halt.
The halts allowed hedge funds to enter AMC and GameStop knowing shares would plummet, allowing them to capitalize on the deflation of the price.
Patrick says the rules of the game also heavily favor hedge funds, something retail investors have urged SEC Chairman Gary Gensler for years to change.
“I respect many of my colleagues, the problem isn’t the people, it’s the rules of the game which heavily favor the funds.”
On the Search for a Lead Plaintiff
The Private Securities Litigation Reform Act of 1995 permits any investor who held Affected Options on the Robinhood trading platform as of the close on January 27, 2021, who sold such options, or such options expired, during the Class Period to seek appointment as lead plaintiff in this class action lawsuit.
A lead plaintiff is generally the movant with the greatest financials interest in the relief sought by the putative class who is also typical and adequate of the putative class.
A lead plaintiff acts on behalf of all other class members in directing a class action lawsuit.
“The lead plaintiff can select a law firm of its choice to litigate the class action lawsuit. Pursuant to the Private Securities Litigation Reform Act of 1995, if you wish to serve as lead plaintiff, you must move the Court that this action is pending in no later than June 9, 2023.”
You can contact the Clerk of the Northern District of California, at 450 Golden Gate Avenue, San Francisco, CA 94102-3489, or by calling (415) 522-2000, to find out if this lawsuit has been transferred to the Southern District of Florida and also for a copy of the Complaint.
To discuss your rights or interests regarding this class action, you are free to consult counsel of your choosing.
You may also contact Nancy Velasquez of the Klafter Lesser LLP law firm at (914) 934-9200 or via email at nancy.velasquez@klafterlesser.com, or Pessah Law Group, PC at (310) 772-2261 or via email at info@pessahgroup.com or Stuart Chelin at (310) 556-9664 or via email at stuart@chelinlaw.com.
Klafter Lesser LLP has extensive experience in prosecuting class actions and the founding partners of the firm, who have extensive class action experience, have recovered over $1 billion for the benefit of classes in numerous cases.
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