Coinspeaker
Roaring Kitty Faces New Securities Fraud Claims in GME Lawsuit
Keith Gill, the internet sensation popularly known as “Roaring Kitty” has been slammed with a class-action lawsuit. Gill, who rose to fame during the 2021 GameStop short squeeze, is being accused of manipulating GameStop’s stock price through social media activity.
Roaring Kitty Sees Pump-and-Dump Scheme Allegations
The lawsuit, filed in the Eastern District of New York, alleges that Gill used his prominence in the online world to orchestrate a “pump-and-dump” scheme involving GameStop stock (GME). That is, between May and June 2024. Typically, a pump-and-dump happens when an asset’s price is artificially inflated through misleading information before selling holdings at a profit. When this happens, orchestrators usually walk away with huge profits, leaving other investors with significant losses.
According to the recent filing, the complaint borders on two key social media posts from Gill. First, a May 12th meme post, which many interpreted as signaling his renewed interest in GameStop. The post allegedly led to an over 70% surge in the stock price the following day. Shortly after, the lawsuit highlights a separate 500% increase in Solana-based meme coins, potentially linked to Gill’s online activity.
A June 2nd Reddit post revealing Gill’s significant GME holdings (including 5 million shares and 120,000 call options) also reportedly led to another 70% premarket price increase. However, the lawsuit contends that Gill’s subsequent exercise of all call options and purchase of additional shares ultimately led to a 15.18% drop in the stock price over the next three days.
The plaintiffs argue that Gill’s actions, fueled by his social media influence, constitute a violation of federal securities laws. Now, they are seeking damages for the losses that they incurred.
Legal Experts Cast Doubt on Lawsuit’s Success
Meanwhile, it appears that from a legal standpoint, this entire lawsuit might not hold water. That is because, despite the accusations, legal experts are still skeptical, having pointed out some technicalities that may turn the suit on its head. Eric Rosen, a former federal prosecutor, for instance, has noted some of such weaknesses in the case. Firstly, Gill’s options had expiry dates, making it already likely that he would eventually sell them. Rosen believes that this makes it not to count as a manipulation tactic.
Secondly, Rosen argues that Gill’s tweets were not financial advice, and any reasonable investor would know better than to solely rely on them for investment decisions. Finally, the lawyer added that Gill’s lack of financial advisor status exempts him from having to disclose trading intent. His statement reads partly:
“This too will be a hurdle that the plaintiffs will have to get over, and it will be difficult for them to do so.”
While it remains to be seen how this suit will go, one thing is clear, people with large influence and followership can impact stock trading in significant ways.
Roaring Kitty Faces New Securities Fraud Claims in GME Lawsuit
