GameStop memeking Roaring Kitty faces lawsuit

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Keith Gill, aka Roaring Kitty is facing a class-action lawsuit accusing him of a pump-and-dump scheme related to his social media posts about GameStop.

The lawsuit alleging that Gill manipulated GameStop’s stock price through his online influence between May and June.

GameStop stocks for sale

The plaintiff claims that Gill bought a large number of GameStop call options before his May 12 meme post, which signaled his renewed interest in GameStop.

This post alone led to a 74% surge in GameStop’s stock price the following day. Next to this, Solana-based memecoins also saw a nice 500% increase after Gill’s return to social media.

Then later, on June 2, Gill posted on Reddit about his stake in GameStop, revealing that he owned 5 million shares and 120,000 call options.

This disclosure caused GameStop’s stock price to rally by over 70% in premarket trading the next day.

Your capital at risk

The lawsuit quoting a Wall Street Journal report where they told that Gill bought a large volume of GameStop options shortly before his May post, raising concerns about possible stock manipulation.

Gill later revealed that he had exercised all 120,000 call options and increased his GameStop stock holdings to over 9 million shares.

This led to a 15.18% drop in GameStop’s stock price over the next three trading sessions.

The plaintiff and other class members claim they suffered financial losses due to the steep decline in the market value of GameStop securities, and alleging that Gill’s actions violated federal securities laws.

They seek to recover damages for their losses. We don’t know if they already tried not trading based on memes.

Not financial advice

Eric Rosen, a former federal prosecutor and founding partner at Dynamis LLP, is skeptical about the lawsuit’s chances of success, predicting it will likely fail.

Rosen identifies more weak points in the case. First, Gill’s options had an expiry date, so it was expected that he would eventually sell them.

Second, Gill’s tweets weren’t investment advice, and reasonable investors wouldn’t make decisions based solely on them. Lastly, Gill wasn’t a financial advisor at all and wasn’t required to disclose his trading intentions.

Rosen notes that only financial advisors or fiduciaries have to disclose their positions or intentions, and Gill is neither.

This will be a make-or-break hurdle for the plaintiffs to overcome, making their case very challenging.

In the US, there have been social media posts about multiple examples of government officials or their relatives making huge trades right before announcements or voting sessions, sparking rumors of insider trading and market manipulation.

These examples likely make it difficult to justify a lawsuit based on social media posts.

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Disclosure:This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Kriptoworld.com accepts no liability for any errors in the articles or for any financial loss resulting from incorrect information.

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