‘Roaring Kitty’ faces class-action lawsuit over alleged GameStop stock manipulation
Keith Gill, popularly known as “Roaring Kitty” on X, is facing a class-action lawsuit over his alleged involvement in a “pump-and-dump” scheme linked to his social media posts about GameStop.
The lawsuit, filed on June 28 in the United States Eastern District of New York, accuses Gill of using his influential social presence to manipulate GameStop’s stock price between May and June.
The complaint accuses Gill of participating in a pump-and-dump scam by discreetly purchasing a large number of GameStop call options prior to his May 12 meme post, which marked his return after three years.
The post was generally perceived as his rekindled interest in GameStop, enabling the stock to rise by more than 74% the next day.
Meanwhile, Solana-based memecoins had a 300% increase shortly after Gill’s social reappearance. The most notable among them was Roaring Kitty (KITTY), which surged by over 8,000% within a 24-hour period.
On June 2, Gill returned to Reddit with a post exposing his massive stake in GameStop, which included 5 million shares and 120,000 call options with an expiry date of June 21.
According to the complaint, the article led GameStop’s shares to soar by more than 70% in premarket trading the next day.
The complaint additionally cited a Wall Street Journal report claiming Gill purchased a large number of GameStop options shortly before his May post, raising worries about potential stock manipulation.
Gill revealed that he had exercised all 120,000 call options, boosting his GameStop stock holdings to over 9 million shares. However, over the next three trading sessions, GameStop’s stock price dropped by 15.18%.
The lawsuit alleges that Gill failed to adequately disclose his intent to sell his options calls in advance, misleading his followers and other market participants and leading to losses for investors.
Plaintiff Martin Radev, represented by the law firm Pomerantz, alleged he incurred losses from the purported “pump and dump” scheme after buying 25 shares of GameStop and three call options beginning in mid-May.
Furthermore, the plaintiff and other class members claimed that Gill’s market manipulation via his social media influence violated federal securities laws. The complaint seeks to recover damages for losses.
Despite the fresh charges, Eric Rosen, a former federal prosecutor and founding partner at Dynamis LLP, is skeptical of the lawsuit’s viability, predicting it would fail.
Rosen identified three shortcomings in this case, which are likely to be dismissed.
According to him, because Gill’s options had an expiration date, it was no surprise that he would eventually sell them.
Additionally, Gill’s tweets did not provide investment advice. According to Rosen, rational investors would not make decisions based only on his tweets.
Moreover, Gill was not required to disclose his trading intentions, as he was not a financial advisor.
Rosen noted that only financial advisors or fiduciaries are generally required to disclose their positions or intentions, adding that “Roaring Kitty is neither.”
He further explained that this “will be a hurdle that the plaintiffs will have to get over, and it will be difficult for them to do so.”
