Robinhood defeats investors’ appeal over meme stock frenzy
Robinhood Markets on Thursday defeated an attraction by buyers over the inventory buying and selling platform’s choice to limit purchases of 13 “meme stocks” throughout a January 2021 frenzy that squeezed hedge funds.
Customers who owned shares corresponding to AMC Entertainment, the previous Bed Bath & Beyond and GameStop claimed within the proposed class motion that they misplaced cash as a result of Robinhood stopped them from shopping for extra as social media-fueled buying and selling drove costs skyward.
Other holders of the shares additionally mentioned they had been harmed, as a result of the restrictions ultimately precipitated costs of their shares to fall.
But in a 3-0 choice, the eleventh U.S. Circuit Court of Appeals in Atlanta mentioned Robinhood’s customary buyer settlement particularly licensed the restrictions, and didn’t recommend that Robinhood would settle for all commerce orders.
The courtroom additionally dismissed claims that Robinhood was negligent in failing to maintain buyers from dropping cash, or failed to make sure that its “mission critical systems” would work correctly.
“When Robinhood restricted its customers’ ability to buy meme stocks, it took a sizable – and perhaps justifiable – hit in the court of public opinion,” Circuit Judge Britt Grant wrote. “But in this court, Robinhood is only accountable for specific legal duties.”
Lawyers for the plaintiffs didn’t instantly reply to requests for remark. Robinhood and its attorneys didn’t instantly reply to comparable requests.
Thursday’s choice upheld a November 2021 ruling by Chief Judge Cecilia Altonaga of the Miami federal courtroom.
The meme inventory frenzy has been fueled partially by buyers utilizing on-line boards corresponding to Twitter and the subreddit WallStreet Bets.
It led to a “short squeeze” that precipitated huge losses for hedge funds betting inventory costs would fall, and what Robinhood referred to as “outsized regulatory collateral calls” for the Menlo Park, California-based firm and different brokers.
Robinhood can be being sued by buyers who offered 9 meme shares at a loss in late January and early February 2021.
Shares of Robinhood had been up 3 cents at US$10.83 at noon on Thursday.
The case is In re January 2021 Short Squeeze Trading Litigation, eleventh U.S. Circuit Court of Appeals, No. 22-10669.
(Reporting by Jonathan Stempel in New York. Editing by Matthew Lewis)
