Keith Gill, the stock trader known for his role in the 2021 GameStop frenzy, is facing securities fraud claims.
A class-action lawsuit filed on June 28 in the Eastern District of New York accuses Gill of organizing a “pump and dump” scheme through several social media posts that caused GameStop (GME) stock prices to fluctuate wildly between May and June 2024.
“Roaring Kitty” Accused of Manipulating GME Stock Price
The complaint alleges that “Roaring Kitty,” used his social media influence to manipulate GameStop’s stock price for personal gain.
According to the filing, Gill began purchasing GameStop call options on E*Trade on May 12, 2024, at relatively low prices. The next day, he caused interest in GameStop by posting on X for the first time in nearly three years, which boosted the stock’s value.
On June 2, 2024, Gill posted on Reddit, disclosing his holdings in GameStop securities, including 120,000 call options and 5 million shares of stock. This post also sent GameStop’s stock price soaring, closing above $45 that day. By June 13, 2024, Gill revealed he had exercised all 120,000 call options, netting profits, which he then used to increase his stake in GameStop by over 4 million shares.
Plaintiff Martin Radev claims he suffered financial losses due to Gill’s alleged manipulation. Radev purchased 25 shares of GME and three call options in mid-May, influenced by Gill’s posts. The lawsuit accuses Gill of failing to disclose his intent to sell his options, misleading investors, and causing them financial harm.
Legal Expert Says Case is “Doomed from Its Inception”
However, not all legal experts believe the lawsuit has merit. In a June 30 blog post, former federal prosecutor Eric Rosen argued that the class-action complaint is “doomed from its inception.” Rosen suggested that Gill could easily dismiss the case with a well-crafted motion.
Rosen explained that the expectation for Gill to disclose his intent to sell his options is unreasonable, as no “reasonable investor” would expect a trader to hold onto options until their expiry date.
“The tweets of a meme stock icon were not something that a ‘reasonable investor’—one who reads earnings reports and analyzes company news—would take into account when making a decision on whether to purchase or sell a stock,” Rosen wrote. “It is unreasonable to purchase securities simply because an individual named Roaring Kitty posted innocuous tweets on social media.”
He also argued that the plaintiff’s claim rests on the notion that Gill’s social media posts directly influenced their investment decisions, which would be difficult to prove in court.
Rosen emphasized that proving securities fraud requires demonstrating that the accused intentionally misled investors by failing to disclose critical information stating that the random memes posted by “Roaring Kitty” on social media do not constitute claims that can be inherently proven or disproven.