An opinion issued on Wednesday said that investors showed that Robinhood acted willfully to depress the price of affected “meme stocks” when it restricted trading during a period of market volatility last year. The 52-page order permitted the plaintiffs’ market manipulation claims to stand but struck their misrepresentation claims for failure to satisfy the applicable heightened pleading requirements.
The case concerns Robinhood’s decision to block trading of certain stocks amidst a spike in trading activity. The operative pleading claims that Robinhood misstated or concealed information from investors to hide its liquidity problem. The investors further allege that Robinhood manipulated the market by, in addition to restricting trading, raising margin requirements, canceling purchase orders, and closing out options early.
This week’s opinion by the judge overseeing the multidistrict fight, Cecilia M. Altonaga, brushed off many of Robinhood’s arguments about market manipulation. Finding that the plaintiffs presented evidence of an intent to manipulate, she said that Robinhood benefitted from its actions and that employees including its CEO knew that statements they made were inaccurate and harmful but made them anyway.
“Tenev’s statements also show not only what Robinhood stood to gain, or rather avoid losing, but the deception used to protect these interests,” the court said of the CEO’s remarks, calling them “a rhetorical sleight of hand, if not an outright lie.”
In recent months, the court has granted Robinhood and other defendants’ motions to dismiss. In March, the “Robinhood Tranche” plaintiffs who alleged various breaches of contract and tort claims against Robinhood appealed their loss before Judge Altonaga to the Eleventh Circuit. In May, the court dismissed the “Antitrust Tranche” plaintiffs’ claims for failure to plead anticompetitive conduct.
The plaintiffs are represented by The Rosen Law Firm PA and Robinhood by Hunton Andrews Kurth LLP and Cravath Swaine & Moore LLP.
