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Robinhood Seeks Dismissal of Lawsuit Alleging Inadequate Disclosure of Crypto Trades Prior to IPO

Robinhood's Efforts to End Class Action Suit Prompted by Lack of Adequate Information Disclosure

Thu, 18 May 2023, 06:34 am UTC

Robinhood is making a renewed effort to have a lawsuit thrown out, which alleges that the firm did not adequately disclose information related to its crypto trades prior to its IPO.

On May 12, attorneys for Robinhood submitted a request to dismiss the ongoing class action suit. This follows a ruling in February that found no evidence of the US publicly traded company providing investors with false or misleading IPO materials in 2021.

US District Judge Edward Chen granted the plaintiffs, who filed the case in a federal court in San Francisco, a chance to submit an amended complaint. It seems that Robinhood's recent request aims to end the case once and for all, concluding a turbulent phase for the firm. As of Tuesday's closing in New York, Robinhood's stock had dropped 22% over the past year, but it has since recovered and is up around 1% this year.

According to court documents, the plaintiffs claim that Robinhood failed to disclose the emergence of "meme stocks" and meme-based coins such as dogecoin and GameStop. Robinhood launched its initial public offering (IPO) in the summer of 2021, just after the meme stock craze in early 2021.

The lawsuit against Robinhood asserts that the company did not appropriately disclose the surge in crypto trading and the subsequent downturn. However, Robinhood's attorneys argue that the "substantial increase in cryptocurrency trading volume in early 2021 — along with its subsequent decline — was extensively covered in the news and social media and thus known to all reasonable investors."

Last April, Robinhood settled with several states, agreeing to pay $10 million in penalties for technical and operational issues that negatively impacted investors.

Robinhood is not the only company attempting to fend off a lawsuit involving meme coins or stocks. In April, Tesla CEO Elon Musk sought to dismiss a case accusing him of direct involvement in the pumped price of dogecoin in 2021 as part of a pyramid scheme.

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