Robinhood Markets Inc (HOOD.O) must face market manipulation claims over restrictions it placed on trading during 2021’s “meme stock” rally, a U.S. judge ruled on Thursday.
U.S. District Court Judge Cecilia Altonaga in Miami ruled that investors in nine stocks may proceed with a class action lawsuit against Robinhood. The stocks involved in the manipulation claims included GameStop Corp (GME.N), AMC Entertainment Holdings Inc (AMC.N), and other unusual stocks. These stocks allege that the restrictions artificially increased the stocks’ supply.
Robinhood Markets temporarily banned customers from investing in these stocks in 2021 during the meme rally due to how high the markets for these stocks became. The lawsuit was sparked by this rally and outrage in the Robinhood community. The social media rally caused major losses for hedge funds betting against these meme stocks. The temporary shutdown of purchasing stocks in these companies also rattled confidence in the general market.
Robinhood also faced a lawsuit by individual customers over the 2020 meme rally. US customers filed the class action lawsuit for the app shutting them out of trading on pandemic-related volatility. That lawsuit was settled for over $50 million back in May, according to Reuters.
Robinhood nor the court have announced the date for the hearings. Robinhood Markets Inc. has yet to comment on the latest lawsuit.