Robinhood Files Opposition to Market Manipulation Claims

On February 11, 2022, Robinhood has filed its opposition to the plaintiffs' claims that it unlawfully manipulated market prices for stocks including GameStop Corp., AMC Entertainment Holdings, Inc., Bed Bath & Beyond Inc., BlackBerry Ltd., Express Inc., Koss Corp., Tootsie Roll Industries Inc., or American Depositary Shares of foreign-issuers Nokia Corp., and trivago N.V. in January 2021.

This is a class action against Robinhood Markets, Inc. and two of its wholly owned subsidiaries, Robinhood Financial, LLC and Robinhood Securities, LLC, on behalf of persons or entities who held the affected stocks as of the close of trading on January 27, 2021, and sold those shares at a loss between January 28, 2021, and February 4, 2021.

Fazzaco Live Webinar Preview: Andrei Savitski Talks About Essentials for Starting A Brokerage

​The plaintiffs include Abraham Huacuja, Ava Bernard, Brandon Martin, Brendan Clarke, Brian Harbison, Cecilia Rivas, Garland Ragland Jr., Joseph Gurney, Santiago Gil Bohórquez, and Trevor Tarvis.

According to the complaint, the defendants completely shut down, initially, and later restricted the demand side of the equation for the affected stocks in the accounts of more than 15 million very active traders for days rather than just minutes. In this way, Robinhood manipulated prices for the affected stocks, and violated Section 9(a) of the Exchange Act and Section 10(b) of the Exchange Act and Rule 10b-5.

Robinhood argues that the plaintiffs do not adequately plead manipulative conduct. They must make specific factual allegations of deceptive conduct regarding market transactions to plead manipulative conduct.

According to Robinhood, the plaintiffs do not allege that a decline in the price of GameStop or AMC after Robinhood implemented the purchase restrictions would have helped Robinhood meet its NSCC deposit requirements. Nor do they provide any other particularized facts or even a reason to infer that Robinhood had such an intent (it did not).

The company concludes that the plaintiffs fail to allege that Robinhood acted with the intent to drive up or down the prices of the Affected Stocks—a core requirement for a market manipulation claim.

In late 2020, Robinhood was slapped a $65 million fine by the US Securities and Exchange Commission (SEC)​ due to non-disclosure practices. Last week, the SEC announced that it was going to distribute another $6.55 million to the affected Robinhood investors. Earlier, the market supervisor has distributed almost $25.7 million.