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 nine 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 seven 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 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 interests of the involved hedge funds, given its ties to Citadel and Melvin Capital.
— Betting Bruiser (@BettingBruiser) January 28, 2021
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, the 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.”
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.