GameStop Trader Keith Gill Faces Securities Fraud Lawsuit; Experts Doubt its Viability
Summary:
Keith Gill, also known as Roaring Kitty, faces a securities fraud class-action lawsuit related to his recent GameStop-related social media posts which allegedly led to significant market fluctuations. However, a former federal prosecutor believes the lawsuit is likely to fail. The complaint alleges Gill conducted a "pump and dump" scheme by not disclosing enough information about his GameStop options activity, which supposedly misled investors and impacted the market. Despite the charges, legal experts believe it would be highly challenging to prove the case in court.
Notorious trader Keith Gill, who gained prominence during the GameStop short crush in early 2021, is now facing charges of securities fraud in connection to a class-action lawsuit, in response to recent social media posts leading to vigorous price fluctuations of GameStop (GME) stocks during May and June. Nevertheless, former federal prosecutor expresses his skepticism about the lawsuit thriving. Filed on June 28 in New York's Eastern District, the suit accuses Gill of spearheading a "pump and dump" strategy via numerous social media posts commencing May 13. The lawsuit claims that Gill failed to provide adequate disclosure regarding his GameStop options purchases and sales, allegedly misleading followers and causing losses for some investors. Marty Radev, the listed plaintiff, represented by Pomerantz law firm, claims he was financially hurt by Gill's alleged scheme after buying a total of 25 GME shares and three call options starting in mid-May. Gill, also known as Roaring Kitty, ended a two-year social media break on May 13, where he began posting a series of mysterious memes on his social media accounts, prompting a 180% rise in GameStop share prices, going from $17.46 to $48.75 by May 14's end of trading day. On June 2, Gill announced a substantial position in GameStop on Reddit, including owning 5 million GME shares and 120,000 GME call options due to expire on June 21, 2024, causing another surge in GME's price that closed above $45 that day. By June 13, Gill reported he had exercised all 120,000 of these call options, realizing considerable gains in the millions, which he then used to acquire more GameStop shares. The lawsuit alleges Gill didn't adequately reveal his intention to sell his option calls beforehand, misleading his followers and other market participants, leading to investor losses. Eric Rosen, former federal prosecutor and founding partner at the law firm Dynamis LLP, in a blog post on June 30, stated that the class-action lawsuit was bound to fail from its inception and could be easily dismissed should Gill file a meticulously prepared dismissal motion. Rosen opined that Gill's failure to disclose his intention to sell his options wouldn't hold much water in court, as no reasonable person, or investor, would expect Gill to retain all his options until their exact expiry date and time. Furthermore, Rosen suggested it would be challenging to establish the plaintiff as a reasonable investor in court, given the lawsuit seemed more intent on profits from the price impact of Gill's posts rather than the contents within these posts. Rosen emphasized the critical aspect of a fraud lawsuit involved proving the accused lied brazenly or deliberately misled investors by not disclosing vital information, which would be extremely challenging to convince a judge in Gill’s case as the innocuous tweet series posted by someone named “Roaring Kitty” don’t inherently provide provable or disprovable information.
Published At
7/1/2024 4:34:36 AM
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