Did Robinhood & Citadel conspire and enter into an anticompetitive scheme to fix, raise, stabilize, maintain or suppress the price of the Relevant Securities?
The relevant securities are AMC Entertainment Holdings, Inc. (AMC), Bed Bath & Beyond Inc. (BBBY), BlackBerry Ltd. (BB), Express Inc. (EXPR), GameStop Corp. (GME), Koss Corp. (KOSS), Tootsie Roll Industries Inc. (TR), or American Depositary Shares of foreign-issuers Nokia Corp. (NOK) and trivago N.V. (TRVG).
At end of January 2021, Robinhood halted trading and/or restricted purchases and/or holdings of multiple stocks for more than a single trading session – January 28th – extending some of its restrictions for six trading sessions, through February 4th.
On January 29th, when other retail brokers had already removed any share purchasing restrictions in force on January 28th, Robinhood increased the number of issuers subject to restrictions – from 13 to 23 to 50 – and did not limit the issuers affected to so-called “meme stocks”, ultimately including Starbucks and General Motors.
On January 29th, Robinhood reduced the number of shares a customer could purchase and hold in various issuers multiple times over the course of a single trading session, causing price declines in the market prices of those stocks in the wake of those restrictions.
Even after raising a $3.4 billion capital cushion against the risk of unsettled positions in its portfolio, Robinhood slowly released its restrictions over the course of the trading week to avoid a repeat of the price rebound on January 29th that Robinhood actively tamped down with its additional restrictions.
This post is open for investors to gather facts, and findings and track their exposure to related lawsuits. We invite investors and shareholders to contribute to this investigation for their own benefit, add events to the factual timeline below and vote on events’ pertinence.
A lawsuit was subsequently filed. We will update this post as it unfolds.
Because the events at cause are essentially the same as in the securities case, we have disabled this timeline. But don’t worry, you can access the factual timeline of relevant events by visiting the Robinhood Markets, Inc. (Jan. 2021 Short Squeeze – Securities) case page:See more on Factual Timeline
This is the first-identified class-action complaint alleging violations of antitrust laws. The case was filed on behalf of:
“All Robinhood and TD Ameritrade customers within the United States.“
This class action is “based upon Robinhood’s intentional and willful restriction for certain securities including but not limited to Naked Brand Group Ltd. (NAKD), Nokia Corporation (NOK), and AMC Entertainment Holdings, Inc. (AMC), from its trading platform thereby dispossessing the retail investors of the ability to invest in the free market.”
Please note that numerous class action complaints against Robinhood (and other entities) were filed in early 2021. The cases were later consolidated and grouped by types of violations (see “Lawsuit Progression”). For convenience purposes, this tab only details the first identified complaint alleging antitrust violations.
For a complete list of class action complaints initially filed with the courts in connection with the January 2021 Short Squeeze, click here.
To access the class action cases grouped by types of violations, please refer to our additional pages:
Defendants combined, conspired, or contracted to contemporaneously decide upon and enact a coordinated prohibition on the purchase of shares of GameStop Corp. (GME), Naked Brand Group Ltd. (NAKD), Nokia Corporation (NOK), and AMC Entertainment Holdings, Inc. (AMC).
“By prohibiting Plaintiffs from purchasing the Stocks but not from selling the Stocks, Defendants engaged in and continue to engage in exclusionary conduct that is deleterious to consumers and to the anticompetitive benefit of the Defendants. Defendants engaged in and continue to engage in anticompetitive conduct.”
“Through the continued anticompetitive conduct of excluding Plaintiffs from the stock market as competitors by prohibiting Plaintiffs purchase of the Stocks, Defendants manifested and continue to manifest a specific intent to monopolize. Defendants’ coordinated prohibition of Plaintiffs’ purchase of the Stocks demonstrates Defendants’ specific intent to monopolize the stock market.”
The complaint also alleges breach of contract, negligence, breach of implied covenant of good faith and fair dealing, conspiracy and breach of fiduciary duty. The complaint also seeks the entry of a temporary restraining order and a preliminary and permanent injunction to allow trading of the securities and a public statement on the trading platforms’ websites about the intention to cease and desist the prohibition of purchase.
The court issued an order appointing the lead plaintiff and lead counsel.
All persons or entities in the United States that held shares of stock or call options through Robinhood in GameStop Corp. (GME), AMC Entertainment Holdings Inc. (AMC), Bed Bath & Beyond Inc. (BBBY), BlackBerry Ltd. (BB), Express, Inc. (EXPR), Koss Corporation (KOSS), Nokia Corp. (NOK), Tootsie Roll Industries, Inc. (TR), or Trivago N.V. (TRVG) as of the close of market on January 27, 2021, and sold the abovelisted securities from January 28, 2021, up to and including February 4, 2021. In this case, the lead plaintiff brings one count of conspiracy to restrain trade in violations of Section 1 of the Sherman Act (15 U.S.C. § 1) alleging that "Defendants conspired and agreed with one another with the intent to artificially lower the price of the relevant stocks. Defendants coordinated a collective shutdown of the stock brokerage market with respect to the relevant securities, prohibiting market participants with the exception of institutional investors such as Citadel Securities from purchasing stock in the Relevant Securities. Pursuant to the conspiracy, the restriction of stock purchases resulted in a sell-off of stocks, driving down prices in the Relevant Securities to levels that would not have been obtained, but for the conspiracy, combination, agreement and restraint of trade."
On 05/13/2022, the court dismissed the complaint with prejudice.
Justice Cecilia M. Altonaga granted Robinhood Markets, Inc., Robinhood Financial LLC, Robinhood Securities, LLC and Citadel Securities LLC’s motion to dismiss the amended complaint.
The Amended Complaint fails for two reasons. One, Plaintiffs fail to plausibly allege the existence of an agreement to restrict trade between Defendants. Sure, Citadel Securities would have economically benefited given its short positions. But Robinhood’s supposed incentive depends on the assumptions that it was motivated by its forthcoming IPO, that Citadel Securities threatened to cut off its relationship with Robinhood in exchange for the trading restrictions, and that Robinhood was unwilling to find another market maker. Plaintiffs do not plausibly allege that Robinhood had such a motivation here, and even if they had done so, economic incentive is not in itself enough for the Court to infer that Defendants actually had an unlawful agreement to restrain trade.
The only additional evidence plausibly alleged by Plaintiffs consists of vague and ambiguous emails between two entities in an otherwise lawful business relationship that, while suspicious given their timing, do little to bolster the strength of Plaintiffs’ allegations. And juxtaposed with the compelling alternative explanation for the trading restrictions — the increased collateral requirements imposed by the NSCC in response to historic market volatility — Plaintiffs’ theory is speculative and implausible.
Two, even if Plaintiffs did plausibly allege an agreement, they fail to plausibly allege an unreasonable restraint of trade. Plaintiffs allege a vertical restraint of trade, which must be evaluated under a rule of reason analysis and thus requires an accurate market definition — something they do not provide. Indeed, Plaintiffs ignore the reality of their suit: they allege that Defendants caused harm to the market for Relevant Securities, but they neglect to define that market. And because they do not define the market for Relevant Securities, their claim fails. Defendants request that the Court dismiss the Amended Complaint with prejudice. (See Mot. 42–43). As the Court stated in the November 17 Order dismissing the CCAC, the Amended Complaint would be Plaintiffs’ final opportunity. (See Nov. 17, 2021 Order 50). Plaintiffs do not insist otherwise, and the Court sees no reason to give Plaintiffs a fourth attempt to plead.
Order on Motion to Dismiss
A securities class action lawsuit is a lawsuit on behalf of investors considered in a similar position, who purchased or sold securities of a company during a certain period and suffered losses because of an alleged wrongdoing. Security is often broadly defined to include bonds, stocks, options, derivatives, and other instruments.
Section 10b of the Securities Exchange Act of 1934 makes it unlawful to “use or employ, in connection with the purchase or sale of any security” a “manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe.” 15 U.S.C. § 78j(b). It is therefore forbidden to: employ any device, scheme, or artifice to defraud; make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made not misleading; or engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
Generally, to be successful, the plaintiff must plead the following:
We invite you to read this article from the American Bar Association which, although from 2014, provide ample information to explore the world of class actions brought under section 10b of Securities Exchange Act of 1934.
Section 11 of the Securities Act of 1933 provides “an express right of action for damages . . . when a registration statement contains untrue statements of material fact or omissions of material fact.” (Thomas Lee Hazen, Treatise on the Law of Securities Regulation, §7.3 at 581 (4th ed. 2002)). Practically, buyers in an initial public offering (IPO), relying on the registration statement and prospectus, are given the right to file a complaint against the company and other signatories for losses sustained as a result of the deficient registration statement and prospectus.
Generally, at least four elements must be plead for the claim to survive:
A shareholder derivative lawsuit is a lawsuit brought by a shareholder of a company, on behalf of the company, against an insider (director, board of directors, executives) or a third-party to redress wrongs and harms to the company. Simply speaking, this mechanism exists because one cannot expect directors and insiders to sue themselves for harms they have done to the company.
The Private Securities Litigation Reform Act (PSLRA) of 1995 was enacted to tighten requirements for securities class actions to be brought in the United States. One of the mechanism put in place was a 60-day period, following the filing of the initial securities class action, for any shareholder considered in similar position to the one filing the initial class action complaint, to ask to be named lead plaintiff. Practically, any time a securities class action falling under the PSLRA is filed with a court, law firms advertise their willingness to pursue the case and invite other investors similarly situated to contact them.
The lead plaintiff in a securities class action is a shareholder who suffered losses related to the purchase or sale of a company’s security during a certain period of time, that is appointed with its choice of counsel to represent the rest of the similarly situated shareholders. To be appointed lead plaintiff, you need to contact a law firm, have them examine your losses and agree to be represented by them and ask to make a motion with the court to be appointed lead. The court will then look at all the motions from the different shareholders and make its decision based on a certain set of criteria. Your inability to be lead plaintiff shall not prevent you from any potential recovery in the event of a settlement.
A class period is a set period of time during which the purchasers or sellers of a company’s security claim in a class action lawsuit to have suffered losses. Class periods are based on the merits of the case and may evolve with the litigation.
A class action complaint will define the initial class of investors: the class period and the persons included in the class. You should look at the definition of the class to determine whether you are included or not. However, the class definition will evolve with the litigation. Its definition is very likely to change between the initial complaint filed and the possible settlement. Generally speaking, you should rely on the definitions of the class stated in a stipulation of settlement to determine whether or not you will be entitled to any recovery (see below about the opting-out mechanism).
You may. The mechanism is called opting-out of class. A lead plaintiff will agree on the potential recovery ratio in a settlement. You may have an interest in opting-out of a class if you have sustained large losses and believe bringing a separate lawsuit would entitle you to a larger ratio of recovery.
You may be able to bring a claim to arbitration in certain scenarios. We encourage you to contact a law firm of your choice to inquire about such alternative dispute resolution mechanism.
We have temporarily disabled auto-updates, the information on this page may not be up to date.