On January 11, GameStop stock (GME) soared after the company hired several new board members that investors believed would help the company boost its digital sales. A group on the website reddit.com called “WallStreetBets” began promoting the stock and the stock’s value rose over 1000% over the next couple of weeks. Due to the rise in the stock’s value, short-sellers who were betting against the stock had to buy shares to hedge their positions and send the stock even higher.
On January 28, 2021, a class action lawsuit was filed in the Southern District of New York on behalf of Brandon Nelson against Robinhood Financial LLC, Robinhood Securities LLC, and Robinhood Markets LLC alleging that the online brokerage firm purposefully, willfully, and knowingly removed the stock “GME” from its trading platform in the midst of an unprecedented stock rise thereby depriving retail investors of the ability to invest in the open-market and manipulating the open-market.
The lawsuit states that “On or about March 23, 2016, Robinhood’s official Twitter account stated: “Let the people trade.” They have since disregarded their mantra and have blocked access for millions of its customers to trade particular securities”.
The lawsuit alleges that on January 28, the Plaintiff used his Robinhood app and searched for the GameStop (GME) stock and found that it was not available and would not even appear in the app even though GameStop is a publicly traded company and available on all other platforms. Due to the unavailability of the app, the Plaintiff and many others lost out on all earning opportunities. Following Robinhood’s decision to restrict the purchasing of GME (GameStop) on January 28, the stock’s price dropped.
Furthermore, the lawsuit alleges “Upon information and belief, Robinhood is pulling securities like GME from its platform in order to slow growth and help benefit individuals and institutions who are not Robinhood customers but are Robinhood large institutional investors or potential investors”.
The class in the lawsuit was defined as All Robinhood customers within the United States and the subclass is defined as all Robinhood customers within the United States who were not able to execute trades on GME after Robinhood knowingly, willfully and purposefully removed it from their platform.
Robinhood entities and their current employees, counsel for either party, the court and its personnel presiding over this action are excluded from the class.
The lawsuit names four causes of action:
1. Breach of contract
2. Breach of the implied covenant of good faith and fair dealing
4. Breach of fiduciary duty