Robinhood Trading Restrictions Lawsuit Faces Another Setback
Investors seeking legal action against Robinhood for the trading restrictions imposed in early 2021 have encountered a new setback after the United States District Court for the Southern District of Florida rejected a request for class certification by the plaintiffs on Nov. 13, 2023. Chief Judge Cecilia Altonaga stated that the plaintiffs’ motion was denied because they could not convince the court that issues of individualized reliance would not be prevalent.
The Allegations Against Robinhood
Robinhood is a platform offering commission-free trading for stocks, exchange-traded funds, options, and cryptocurrencies. The lawsuit revolves around allegations of market manipulation by Robinhood during the “meme stock” short squeeze in early 2021, which led to heightened market volatility and increased deposit requirements for clearing brokers.
Robinhood’s Response
Robinhood was unable to meet the increased deposit requirements and implemented restrictions on specific stocks trading, claiming it was due to market volatility while denying any liquidity issues. The plaintiffs argue that the platform manipulated the market by imposing restrictions and presenting misleading information about volatility.
The Court’s Decision
Robinhood urged the court to reject class certification, citing deficiencies in the class representatives and asserting that individualized issues of reliance and damages will overshadow common concerns. The court acknowledged that the case and representatives are suitable for class treatment, but could not be persuaded that issues of individualized reliance would not be prevalent.
Hot Take: Dismissal of Class Certification Request in Robinhood Lawsuit
The denial of class certification represents a significant hurdle for investors seeking legal action against Robinhood. This setback highlights the challenges in proving common concerns among plaintiffs in complex cases involving market manipulation claims. Despite this setback, investors may continue pursuing individual legal actions against Robinhood to seek redress for their grievances.
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