Robinhood Markets stood its ground against an appeal by investors on Thursday. This action arose from the ongoing Short Squeeze Trading Litigation against the trading platform regarding its decision to restrict the purchase of 13 meme stocks during the January 2021 frenzy that squeezed hedge funds.
Robinhood defeats meme stock frenzy appeal
At the time, customers owning stocks such as AMC Entertainment, the previous Bed Bath & Beyond, and Gamestop, claim they lost money because Robinhood prohibited these stock buys as social media activities caused prices to skyrocket. Other stockholders claimed the restrictions caused price drops. Investors using online stages such as Twitter and Wall Street Bets initiated this so-called avalanche.
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Despite lengthy legal battles, the 11th US Circuit Court of Appeals cast a 3-0 decision in favour of Robin Hood. It pointed out that the standard customer agreement clearly authorises restrictions and does not create a notion that the trading and investment platform would accept all trade offers.
Furthermore, the court dismissed claims of negligence causing investors to lose money or that Robinhood failed to ensure ‘mission-critical systems’ were functional. These decisions upheld the November 2021 ruling of the Miami Federal Court.
Britt Grant Source: Federalist Society
Robinhood, nor its lawyers, nor the lawyers for the plaintiffs publicly commented on the ruling. Circuit Judge Britt Grant wrote:
When Robinhood restricted its customers’ ability to buy meme stocks, it took a sizable – and perhaps justifiable – hit in the court of public opinion. But in this court, Robinhood is only accountable for specific legal duties.
