Key Takeaways
- Keith Gill is accused of manipulating GameStop’s stock through social media.
- The lawsuit claims Gill’s actions led to significant investor losses.
‘Roaring Kitty’ Keith Gill has faced a class-action lawsuit over his alleged involvement in a pump-and-dump scheme related to his social media posts about GameStop. The lawsuit, filed on June 28 in the Eastern District of New York, claims that Gill manipulated GameStop’s stock price through his influential online presence between May and June.The plaintiff accuses Gill of engaging in a pump-and-dump scheme by quietly purchasing a large volume of GameStop call options before his May 12 meme post, which marked his comeback after three years.The post was widely interpreted as his renewed interest in GameStop, causing the stock price to surge by over 74% the following day. Meanwhile, Solana-based memecoins also recorded a 500% surge shortly after Gill’s social return.On June 2, Gill returned with a Reddit post revealing his large stake in GameStop, including 5 million shares and 120,000 call options. According to the complaint, the post caused GameStop’s stock price to rally by over 70% in premarket trading the next day.
The filing also cited a report from the Wall Street Journal that said Gill had bought a large volume of GameStop options shortly before his May post, raising concerns about potential stock manipulation.Gill disclosed that he had exercised all 120,000 call options and increased his GameStop stock holdings to over 9 million shares. This led to a 15.18% drop in GameStop’s stock price over the next three trading sessions.As a result of Gill’s actions, the plaintiff and other class members said they suffered major financial losses due to the steep decline in the market value of GameStop securities.They said that Gill’s manipulation of the market through his social media influence constitutes a violation of federal securities laws. The lawsuit seeks to recover damages for losses.“Complaint is likely doomed”Despite the new allegations, Eric Rosen, a former federal prosecutor and founding partner at Dynamis LLP, has expressed skepticism about the lawsuit’s success, deeming it likely to fail.Rosen pointed out three weak points in this case, which will likely be dismissed. According to him, since Gill’s options had an expiry date, it wasn’t a secret that he’d eventually sell them.Additionally, Gill’s tweets were not investment advice. According to Rosen, reasonable investors wouldn’t base decisions solely on his tweets. Furthermore, Gill wasn’t a financial advisor and wasn’t obligated to disclose trading intent.
“Generally, only financial advisors or fiduciaries have to disclose their positions or intent or things of that ilk. Roaring Kitty is neither. This too will be a hurdle that the plaintiffs will have to get over, and it will be difficult for them to do so,” Rosen noted.
