Keith Gill, recognized for his role in the renowned GameStop short-squeeze of 2021, is presently confronted with securities fraud allegations in a class-action lawsuit. The case revolves around a series of Gill’s social media posts made in May and June, which purportedly influenced the extreme price changes of GameStop stocks.
The class-action lawsuit, filed on June 28 in the United States District Court for the Eastern District of New York, accuses Gill of initiating a “pump and dump” scheme through his social media activities commencing May 13. The plaintiff, Martin Radev, represented by the law firm Pomerantz, claims he was harmed by this alleged plan after investing in GameStop shares and call options in mid-May.
The lawsuit contends that Gill failed to sufficiently divulge his intent to sell his options in advance, which purportedly swayed his followers and other market players, ultimately resulting in investor losses.
Gill broke a two-year silence on social media on May 13, putting across a series of cryptic posts. These posts triggered a significant surge in GameStop stock prices, escalating from a previous $17.46 to $48.75 by the end of trading day on May 14. Gill’s later posts indicating a large holding in GameStop and his utilization of gains for further GameStop purchases resulted in additional surges in GameStop’s investment prices.
However, former federal prosecutor, Eric Rosen, anticipates that the lawsuit will falter. In a June 30 blog post, Rosen proposes that the claim would not fare well in court, as it would be irrational to expect Gill to irrevocably hold onto all his options until their expiration. He further alludes to the improbability of a favorable court ruling for the plaintiff’s strategy of profiting merely from the impact Gill’s posts had on stock prices. Rosen also notes that proving accusations of fraud would be arduous, given that a series of memes from “Roaring Kitty” should not reasonably be considered as providing factual information to investors.