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Robinhood to Face Class Action Suit Over Halting Meme Stock Trading

source-logo  beincrypto.com 12 August 2022 05:00, UTC

A U.S. District Court Judge ruled that Robinhood must go through with a lawsuit that complains of market manipulation relating to the meme stock rally that took place last year.

U.S. District Court Judge Cecilia Altonaga from the Miami court has ruled that trading platform Robinhood must go through with a lawsuit related to several stocks from the meme stock rally last year. Robinhood must not face the claims that it carried out market manipulation when it temporarily halted customers from buying certain stocks in early 2021.

Those stocks include GameStop and AMC, both of which were at the heart of the meme stock frenzy that took place in 2021. Retail traders purchased the stock in droves, leading to a massive boost in price. The trading platform then restricted the trading of the stocks, much to the anger of the traders.

Robinhood and others imposed restrictions on the buying of the stocks, with the trading platform carrying out multiple actions as it faced a deluge of buys. The case was the start of a suite of negative headlines for the company which has seen its stock price dwindle since the peak price in August 2021.

Judge Altonaga has also cast aside claims from retail investors that Robinhood was negligent and breached its duty, as well as the claim that Robinhood conspired to put a stop to a short squeeze. Meanwhile, the company says that it believes that the actions it took were “appropriate and necessary.”

Robinhood experiencing some tough times

Robinhood has not had the most stellar 2022, with several notable developments taking place. The platform had to cut its workforce by 23% this quarter, while its crypto trading unit was fined $30 million in a landmark case.

Meanwhile, there have been rumors that FTX was considering acquiring the exchange. CEO Sam Bankman-Fried denied these rumors, though he himself has a 7.6% stake in Robinhood.

Still aiming to grow

While times have been tough for Robinhood, it has been focusing on expanding its business. It plans to launch a non-custodial wallet, which would pit it against giants Coinbase and MetaMask. It also plans to integrate U.K. crypto company Ziglu, which would prepare it for an expansion into Europe.

Robinhood seems to be fighting off the struggles it has been facing. However, the lawsuit will be closely watched and could result in a ruling that deals another blow to a company that has been trying to pick itself back up since last year.