What You Need to Know
- Retail investors had accused the firms of colluding during January’s meme-stock frenzy.
Citadel Securities and Robinhood Markets Inc. won dismissal of a proposed class-action lawsuit brought by retail investors who accused the firms of colluding during January’s meme-stock frenzy.
U.S. District Judge Cecilia Altonaga in Miami said that the plaintiffs failed to show there was any agreement between Citadel Securities and Robinhood to act in concert. In a Wednesday ruling, she dismissed the case without prejudice, giving the investor group until Dec. 20 to possibly file an amended complaint.
The lawsuit alleged that Citadel Securities amassed a substantial short position in GameStop Corp. and other stocks that exploded in value, and that the market-maker pressured Robinhood to stop customers from purchasing those shares, which the online brokerage did on Jan. 28.
“The request from a market maker to limit order flow sent to it is not equivalent to a demand to restrict trading,” Altonaga wrote in her decision.
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“We are pleased that the court agreed that there is no basis for the plaintiffs’ conspiracy theories and summarily dismissed the case,” Citadel Securities spokesman David Millar said in an emailed statement.
Robinhood spokeswoman Jacqueline Ortiz Ramsay likewise said in an emailed statement, “This further confirms that the conspiracy theory of collusion has no basis in fact.”
The legal battle has drawn attention to the complex machinery behind the execution of trades. Robinhood sends customer orders to Citadel Securities and other trading firms to be carried out, and accepts remuneration from those firms in what’s called payment for order flow.
Citadel Securities said it first learned of Robinhood’s trading restrictions on certain stocks during January’s meme-stock frenzy from Twitter, rebutting accusations that the two firms colluded. E*Trade Securities and Interactive Brokers were also named as defendants in the case.