Skip to main content

Court Dismisses Suit Claiming Robinhood, Citadel Prevented Meme Stock Trading

District Judge Cecilia Antonaga ruled that there was not enough evidence to support the companies colluding to prevent a GameStop and AMC short squeeze.

A Miami court threw out a class action lawsuit claiming online trading platform Robinhood ( (HOOD) - Get Free Report) colluded with Citadel Securities to prevent investors from buying popular meme stocks as they were rising in price in order to create a sell-off.

As first reported by Reuters, U.S. District Judge Cecilia Antonaga of the Southern District of Florida ruled that there was not enough evidence to show that Robinhood and Citadel Securities conspired to prevent the trading of companies like GameStop ( (GME) - Get Free Report), AMC Entertainment Holdings ( (AMC) - Get Free Report) and Bed Bath & Beyond ( (BBBY) - Get Free Report) in order to stop a short squeeze.

In January, stock for these companies was soaring to all-time highs amid a social media frenzy that in many ways was created by investors themselves. 

On Jan. 28, Robinhood put limits on trading stocks that included these companies due to what it claimed to be the prohibitively expensive cost of having so many trades all at once.

Investors in the class action lawsuit had tried to argue that these restrictions left them with no choice but to sell their stocks quickly to prevent financial loss. 

In September, they filed a lawsuit that included emails showing communication between Robinhood and Citadel before and after the restrictions were imposed.

But Antonaga ruled that "a few vague and ambiguous emails between two firms in an otherwise lawful, ongoing business relationship" are "not enough to nudge plaintiffs' claims across the line" to what is plausible enough for a court case. 

A Robinhood representative told Reuters that the ruling "further confirms that the conspiracy theory of collusion has no basis in fact."

Frank Schirripa, a lawyer representing the investors, told Reuters that they were disappointed with the ruling but would be amending their complaint. 

For the suit to be reconsidered, they would need to submit a revised version of the complaint by Dec. 20.

At close on Thursday, Robinhood ( (HOOD) - Get Free Report) stock was down 7.15% to 30.53.