Cryptocurrency News

Robinhood to face class action lawsuit from meme stock debacle: Report


Cryptocurrency and stock trading platform Robinhood will allegedly face allegations of market manipulation as part of a class-action lawsuit brought by investors in “meme stocks” from 9 different companies during a January 2021 rally.

According to a Thursday report from Reuters, United States District Court Judge Cecilia Altonaga of the Southern District of Florida ruled that investors in GameStop, AMC, and 7 other unnamed stocks — which may include Nokia and BlackBerry — could proceed with a lawsuit alleging that Robinhood artificially increased the supply of stocks. In January 2021, the price of several assets including the meme token Dogecoin (DOGE) rose to then all-time highs after Redditors on r/Wallstreetbets pumped up interest in certain stocks and cryptocurrencies.

Robinhood suspended — but later resumed — buys of GME stock and others following the assets rising exponentially, putting the trading platform in the middle of a fight between retail investors and large hedge funds shorting stocks. Thousands of users left one-star reviews for Robinhood’s app on the Google Play Store, the platform put its plans for an initial public offering in the U.S. on hold, and individuals filed several class-action lawsuits alleging Robinhood was kowtowing to the involved hedge funds’ interests, given its ties to Citadel and Melvin Capital.

Following the meme stock controversy, Robinhood was sometimes the target of U.S. lawmakers looking for answers. CEO Vlad Tenev testified before a House Financial Services Committee hearing in February 2021. Unrelated to the events around meme stocks, New York Department of Financial Services also announced on Aug. 2 that Robinhood Crypto will pay a $30 million penalty to the state “for significant failures in the areas of bank secrecy act/anti-money laundering obligations.”

Related: Robinhood acquires British crypto firm Ziglu to push expansion plans

Following the release of Robinhood’s financial results for the second quarter of 2022, Tenev said he planned to lay off 23% of staff at the firm, saying cutting the workforce down by 9% in April didn’t “go far enough” to help the trading platform. At the time of publication, shares of HOOD are trading for $10.59, having risen by more than 26% in the last 30 days.

Cointelegraph reached out to Robinhood, but did not receive a response at the time of publication