Keith Gill, famously known as ‘Roaring Kitty,’ is facing fresh allegations of securities fraud stemming from his social media activities. Filed in the Eastern District of New York on June 28, a class-action lawsuit accuses Gill of orchestrating a “pump and dump” scheme, allegedly causing financial losses for certain investors.
According to the complaint, Gill initiated this scheme through a series of social media posts starting on May 13. Plaintiff Martin Radev, represented by the Pomerantz law firm, claims that Gill misled his followers by not disclosing his transactions involving GameStop (GME) options calls. Radev, influenced by Gill’s posts, purportedly purchased 25 GME shares and three call options, which resulted in financial losses.
The lawsuit alleges that Gill’s social media activities, including posting cryptic memes on his X account, led to a significant 180% surge in GME stock on May 14. Furthermore, on June 2, Gill disclosed a substantial position in GameStop, holding 5 million shares and 120,000 call options expiring in June 2024. This disclosure triggered another surge in GME’s price, closing above $45.
As of July 1, GameStop Corp (GME) shares closed at $24.69, reflecting a 1.59% decline from the previous day’s close of $25.09. Pre-market trading indicated a further 0.49% decrease, with shares priced at $24.57, indicating ongoing market volatility.
Legal experts have weighed in on the lawsuit, with Eric Rosen, a former federal prosecutor and current partner at Dynamis LLP, suggesting that the claims may lack substance. In a blog post on June 30, Rosen argued that proving fraud would require demonstrating intentional deception by Gill, which he believes is not sufficiently supported by Gill’s social media posts, primarily consisting of memes.
Rosen emphasized that the plaintiff’s case relies heavily on the price impact of Roaring Kitty’s posts rather than their actual content, which could weaken their argument for reasonable investor reliance.
The outcome of this lawsuit could have significant implications for social media influencers and retail investors alike. If successful, it might establish a precedent for holding individuals accountable for their market-influencing social media activities. However, Rosen’s analysis suggests that the lawsuit faces substantial hurdles before reaching such a conclusion.
In response to the allegations, Keith Gill maintains his innocence, asserting transparency in his investment strategies. The legal proceedings will ultimately determine the validity of these claims and may shape future interactions between social media and financial markets, underscoring the importance of transparency and due diligence in trading practices.