Robinhood Short Squeeze Litigations Consolidated into MDL

Elizabeth DiNardo, Esq. | Associate Counsel


On April 1, 2021, the Judicial Panel on Multidistrict Litigation issued a transfer order centralizing all suits in the Robinhood January 2021 Short Squeeze litigation in the Southern District of Florida under Judge Cecilia M. Altonaga. According to the transfer order, the newly consolidated actions share factual questions arising from trading restrictions imposed by Robinhood and other brokers in late January 2021 in response to a dramatic rise in trading and share prices for a group of so-called “meme stocks.” Meme stocks include GameStop Corp, AMC Entertainment Holdings Inc, American Airlines Group Inc., Bed Bath & Beyond Inc., BlackBerry Ltd., Express, Inc., Koss Corporation, Naked Brand Group Ltd., Nokia Corp, Sundial Growers Inc., Tootsie Roll Industries, Inc. and Trivago N.V.

The activity surrounding this lawsuit caused a major disruption in financial markets as independent retail traders converged on popular sub-Reddit r/WallStreetBets to form plans to curb hedge funds from making bets on the downward trajectory of stock prices. Stocks like GameStop were targeted, while the defendant allegedly knew that the professional traders had taken short positions on these securities and would be exposed to ruinous losses, essentially subjecting them to a “short squeeze.”

On January 27, 2021, the plaintiffs argued that Robinhood attempted to slow the growth of GameStop stock by denying customers the ability to use its services by abruptly removing the stock from the Robinhood app. The plaintiffs further claimed that the defendant’s actions were done purposefully and knowingly to manipulate the market for the express benefit of people and financial institutions who are not Robinhood customers.

Suits in the MDL allege that these trading restrictions created a one-way sell situation and resulted in a steep decline in share prices for the meme stocks, which in turn caused plaintiffs economic injury and allowed the carious institutional investors to cover their short positions in these securities.

Defendants in these suits include Alpaca Securities LLC, Barclays Bank PLC, Citadel Securities LLC, Citadel Enterprise Americas LLC, The Depository Trust Company, The Depository Trust & Clearing Corporation, eToro USA Securities, Inc., E*Trade Financial Holdings LLC, E*Trade Financial Corporation, E*Trade Securities LLC, Morgan Stanley Smith Barney LLC, Open to the Public Investing, Inc. Point72 Asset Management, L.P. and Sequoia Capital Operations LLC.

The Case Is: In re: January 2021 Short Squeeze Trading Litigation, Case No.: 1:21-md-02989, in the U.S. District Court for the Southern District of Florida, Miami Division

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