Keith Gill, also known as “Roaring Kitty,” a stock trader who gained fame during the GameStop frenzy in 2021, is now facing securities fraud claims. A class-action lawsuit filed in the Eastern District of New York accuses Gill of engaging in a “pump and dump” scheme through his social media posts. The lawsuit alleges that Gill used his influence on social media platforms to manipulate the stock price of GameStop for personal gain. The complaint claims that Gill’s actions caused GameStop’s stock prices to fluctuate widely between May and June 2024.
The lawsuit details the timeline of events, stating that Gill started purchasing GameStop call options on E*Trade in May 2024 at low prices. He then posted about GameStop on social media platforms, including X and Reddit, causing a surge in interest and the stock price. Gill disclosed his holdings in GameStop securities, which included 120,000 call options and 5 million shares of stock. This disclosure led to a significant increase in GameStop’s stock price, closing above $45 on the day of the post.
On June 13, 2024, Gill revealed that he had exercised all 120,000 call options, resulting in substantial profits. He used these profits to increase his stake in GameStop by over 4 million shares. One of the plaintiffs, Martin Radev, claims to have suffered financial losses as a result of Gill’s alleged manipulation. Radev purchased shares and call options in mid-May after being influenced by Gill’s posts.
While the class-action lawsuit accuses Keith Gill of securities fraud, not all legal experts believe that the case has merit. Former federal prosecutor Eric Rosen expressed skepticism about the lawsuit’s chances of success in a blog post. Rosen argued that the expectation for Gill to disclose his intent to sell his options is unreasonable. He stated that a reasonable investor would not rely solely on social media posts by a meme stock icon when making investment decisions.
Rosen also emphasized the difficulty of proving that Gill’s social media posts directly influenced investors’ decisions. He pointed out that proving securities fraud requires demonstrating intentional misleading of investors by failing to disclose critical information. Rosen concluded that the allegations based on random social media posts by “Roaring Kitty” may be challenging to prove in court.
The allegations of securities fraud against Keith Gill in connection with the GameStop frenzy raise important legal and ethical questions. While the lawsuit claims that Gill’s social media posts manipulated the stock price of GameStop, the case may face challenges in proving intentional wrongdoing on Gill’s part. The outcome of this legal dispute will likely have implications for the regulation of social media influence on stock markets and investor behavior.
Leave a Reply