A United States federal appeals court has upheld a decision to dismiss an investor class action lawsuit against online brokerage firm Robinhood Markets over its meme stock trading debacle in early 2021.
A total of 16 investors took part in a class action lawsuit against the trading platform in September 2021, alleging the firm restricted them from purchasing 13 “meme stocks” when hedge funds were being short squeezed in January 2021.
This stopped them reaping the profits and also caused the share prices of these stocks to plummet, they alleged.
Robinhood won a motion to dismiss the complaint in January 2022, citing the plaintiff’s failure to state a claim, plaintiffs then went on to argue the decision in the U.S. appeals court in March 2023.
However, it appears the investors have hit another setback as the appeals judge has upheld the decision to dismiss the lawsuit, with U.S. Appellate Court Judge Britt Grant saying the arguments lacked legal merit.
She explained that Robinhood “had the right to do exactly what they did” because they were not legally obligated to protect these investors from pure economic loss.
This is because Robinhood was, and still is legally permitted to restrict its customers’ ability to trade securities and to refuse to accept any of their transactions, Judge Grant added.
