Robinhood, an online platform for commission-free, real-time trading of stocks, ETFs, options, gold, and cryptocurrency, faces market manipulation allegations for restricting trading in securities of  GameStop Corp (GME), AMC Entertainment Holdings Inc (AMC) and seven others over a social media-fuelled price rally from retail investor groups in January 2021.   

The company had decided to restrict trading and limit the number of shares its users were able to fund through its platform for over a day when its clearinghouse requirements rose to a USD 3 billion cash settlement following the price rally and Robinhood was lacking capital to meet this requirement. The class action lawsuit against Robinhood represents the interests of the group of retail investors of the nine stocks on which trading was halted.

The US District Court in Miami ruled that investors in GME, AMC, and seven other securities can proceed with their proposed class action lawsuit that alleges Robinhood’s action of restricting trading in these securities artificially drove down share prices. In addition, the judge ruled out to dismiss Robinhood’s motion to dismiss the accusation of its involvement in manipulating the market by canceling purchase orders, liquidating its customers’ shares, and closing out options.