Keith Gill, famously known as “Roaring Kitty” on social media, is embroiled in a class-action lawsuit accusing him of manipulating GameStop’s stock price through a pump-and-dump scheme. The lawsuit, filed on June 28 in the United States Eastern District of New York, alleges that Gill used his substantial online influence to artificially inflate GameStop’s stock between May and June 2024.
Allegations of a Pump-and-Dump Scheme
The lawsuit claims that Gill orchestrated a “pump-and-dump” scheme by secretly purchasing a substantial number of GameStop call options before posting a meme on May 12, signalling his renewed interest in the stock. This post allegedly caused GameStop’s stock to surge by over 74% the following day.
The Impact on Memecoins
The influence of Gill’s social media activities extended beyond GameStop. Solana-based meme coins, particularly Roaring Kitty (KITTY), saw a remarkable 300% increase shortly after Gill’s reappearance. KITTY surged by an astonishing 8,000% within 24 hours.
Massive Stake Disclosure and Market Reaction
On June 2, Gill posted on Reddit, revealing his massive stake in GameStop, which included 5 million shares and 120,000 call options expiring on June 21. This disclosure led GameStop’s shares to soar by more than 70% in premarket trading the next day.
Accusations of Stock Manipulation
The complaint, citing a Wall Street Journal report, alleges that Gill bought a significant number of GameStop options shortly before his May post, raising concerns about potential stock manipulation. It further accuses Gill of failing to disclose his intent to sell his options in advance, misleading his followers and other market participants, and causing investor losses.
Legal Experts Weigh In
Despite these allegations, Eric Rosen, a former federal prosecutor and founding partner at Dynamis LLP, is skeptical about the lawsuit’s success. Rosen points out three major shortcomings: the inevitability of selling expiring options, the non-advisory nature of Gill’s tweets, and the lack of a legal requirement for Gill to disclose his trading intentions, as he is neither a financial advisor nor a fiduciary.
so a dude named Martin Radev is suing Roaring Kitty for securities fraud due to his promotion of gamestop $gme in a class action lawsuit
the dude has 35 shares and a couple of options 💀💀💀
i dont think the case has the best chance in court and won’t really affect Keith Gill,… pic.twitter.com/WIuUSpds6n
— amit (@amitisinvesting) July 1, 2024
Conclusion
The lawsuit seeks damages for the losses incurred by investors, including the plaintiff, Martin Radev, who bought 25 shares of GameStop and three call options beginning in mid-May. However, Rosen believes that the plaintiffs will face significant hurdles in proving their case.
Discussion about this post