Litigation over a run on stock in GameStop and other companies—which touch off an abrupt trading halt on Jan. 28—has expanded beyond beyond Robinhood and its customers, with attorneys now alleging a conspiracy to manipulate the market that involved several other online trading platforms, hedge funds and clearinghouses.
Robinhood halted trades of at least 13 companies last month after Reddit users and others bought up their stock, sending share prices soaring and threatening short sellers with potentially billions of dollars in losses. Most of the lawsuits first filed alleged consumer fraud and breaches of fiduciary duty against Robinhood on behalf of its customers, but the latest class actions brought claims under antitrust law, naming dozens of defendants such as hedge fund Citadel and brokerage firm TD Ameritrade Inc.
They claim the companies, which restricted stock purchases for smaller investors while allowing hedge funds to buy shares, conspired to restrain the market and manipulated stock prices.
Adding antitrust claims expands the potential class, defined as anyone who lost money, said William Audet, of San Francisco’s Audet & Partners. He filed a consumer class action on Jan. 29, then brought an antitrust class action on Feb. 2.
“This case could be a lot bigger than the Robinhood angle,” he said. “I’m kind of blown away at how big this could be.”
Robinhood’s customers number about 10 million alone, but the antitrust cases, with additional defendants, could have a total class size to tens of millions of people.
“The class is astronomical,” said Lana Nassar, of Chicago’s Blaise & Nitschke, whose firm filed two antitrust class actions. “It’s quite large, which is why there are so many lawsuits filed across the United States.”
There are nearly 50 class actions pending against Robinhood and others in 11 states, including California, Texas, Florida, New Jersey, New York, Connecticut and Pennsylvania.
On Friday, Joseph Saveri, of Joseph Saveri Law Firm in San Francisco, who filed an antitrust case on Feb. 1, filed a motion before the U.S. Judicial Panel on Multidistrict Litigation to coordinate 42 class actions into multidistrict litigation in the Northern District of California, where Robinhood and several other defendants have headquarters. Suggesting a broadly named docket of In re GameStop et al, “Short Squeeze” Antitrust Litigation, Saveri listed at least 35 defendants and their subsidiaries facing lawsuits over the trading halt.
Although not all of the cases have antitrust claims, they involve the “same nucleus of facts, the same series of transactions, decisions, events over the same period of time,” Saveri said.
The halt in trades, which involved shares of GameStop and American Airlines, has prompted concern about market manipulation and drawn the attention of Congress, with some lawmakers calling for a hearing. The U.S. Securities & Exchange Commission also is reviewing matter.
In the civil suits, Robinhood has brought in Cravath, Swaine & Moore partners Kevin Orsini and Antony Ryan, as well as Naeun Rim and Grace Kang of Los Angeles-based Bird Marella Boxer Wolpert Nessim Drooks Lincenberg Rhow.