Roaring Kitty faces securities fraud claims in ‘missing’ GME case
Stock trader Keith Gill, known for shorting GameStop in 2021, is facing claims of securities fraud in a class-action lawsuit over recent social media posts that sent GameStop ( GME ) shares soaring between May and June. .
But a former federal prosecutor believes the case is “likely to fail.”
The complaint, filed June 28 in the Eastern District of New York, seeks to accuse Gill of orchestrating a “pump and dump” scheme through a series of social media posts beginning May 13.
The complaint alleges that Gill committed securities fraud by failing to adequately disclose the purchase and sale of GameStop options calls, which allegedly misled his followers and caused losses to some investors.
Plaintiff Martin Radev, represented by the Pomerantz Law Firm, claims he was harmed by the alleged “pump and dump” after buying a total of 25 shares and three call options in GME.
Breaking down the return of Roaring Kitty
Gill came out of a two-year social media hiatus on May 13 to post a series of cryptic memes on his X account, sending GameStop's stock up 180%, flying from $17.46 to $48.75 at the close of trading in May. 14.
In a post to Reddit on June 2, Gill revealed a large position in GameStop, including 5 million GME shares and 120,000 GME call options with an expiration date of June 21, 2024.
This sent GME prices up again, closing above $45 for the day.
On June 13, Gill shared that he used all 120,000 of these option calls, making millions of dollars in profits. Specifically, he used these benefits to stockpile more GameStop stock.
According to the suit, Gill did not adequately disclose his interest in selling options calls, which misled his followers and other market participants and caused losses to investors.
The complaint is “lost,” says the lawyer
In a June 30 blog post from former federal prosecutor Eric Rosen — a founding partner of the Dynamis LLP law firm — Rosen said the class-action complaint was “flawed from the beginning” and that if Gill filed a “well-” it could easily be dismissed. Created” dismissal motion.
Rosen said that the claim that Gill should have disclosed his intention to sell the options would not hold up well in court because no “reasonable person, let alone a reasonable investor” would expect Gill to hold all of their options until the expiration date.
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Second, Rosen argued that since it was “clear” that the plaintiff was simply seeking to profit from the price impact of Gill's posts on X, not the actual content of X's posts, one's status as “reasonable is difficult to prove.” Investor” based on this approach in court.
“It doesn't make sense to buy securities just because Roaring Kitty posted harmless tweets on social media.”
Rosen said the most important part of prosecuting a fraud case is establishing whether a fraudster actually lied or intentionally misled investors by not providing important information.
He explained that a series of random memes posted on social media by one “Roaring Kitty” would be incredibly difficult to get past a judge because they are not inherently factual claims that can be verified or debunked.
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