Robinhood Ordered To Face Market Manipulation Claims; Meme-Stock Investors Get Nod To File Lawsuit

A U.S. judge gave meme stock investors permission to file a lawsuit against Robinhood, a stock trading firm that recently listed multiple cryptocurrencies, including Avalanche (AVAX) and Stellar (XLM).

U.S. District Court Judge Cecilia Altonaga in Miami said Thursday that investors in GameStop Corp, AMC Entertainment Holdings and seven other stocks can file a lawsuit against the financial services firm, Reuters reported.

The investors in these stocks proposed a class action lawsuit, which claims that Robinhood introduced trading restrictions during last year's meme stocks rally, which depressed the prices of these assets.

This lawsuit is one of the several suits the firm is facing after halting purchases during the meme stock rally in January last year. The rally caused major losses to hedge funds that had bet against these meme stocks.

The U.S. judge said Robinhood must face investors' claims of market manipulation for imposing these restrictions.

Meanwhile, a representative from the crypto and stock trading platform said it will stand by its decision, which it believes was "appropriate and necessary to support our customers."

"The court has not yet made any findings of fact or ruled on the merits – and we will continue to vigorously defend ourselves in this matter," said Cheryl Crumpton, associate general counsel of litigation and regulatory enforcement at Robinhood.

Robinhood was facing tough times lately as it recently confirmed that it was laying off 340 full-time workers. It seems the firm's crypto adoption is an attempt to capitalize on the growing market and it currently allows the trading of Avalanche (AVAX), Bitcoin (BTC), Bitcoin Cash (BCH), Bitcoin SV (BSV), Chainlink (LINK), Compound (COMP), Dogecoin (DOGE), Ethereum (ETH), Ethereum Classic (ETC), Litecoin (LTC), Polygon (MATIC), Shiba Inu (SHIB), Solana (SOL), Stellar Lumens (XLM) and Uniswap (UNI) on its platform.

There were also rumors of crypto mogul Sam Bankman-Fried, also known as SBF, buying the crypto and stock trading platform, which were later denied by the FTX CEO and founder.