YouTube Reddit user ‘Roaring Kitty’ sued for securities fraud over GameStop Short Squeeze

Keith Gill, also known as “Roaring Kitty” on Twitter / YouTube and “DeepFuckingValue” on Reddit, faces a proposed class action lawsuit for his role in the huge short squeeze GameStop orchestrated by Reddit’s r / WallStreetBets board , Bloomberg reported Wednesday.

According to Bloomberg, the lawsuit was brought by Hagens Berman Sobol Shapiro, a securities class action firm, on behalf of Christian Iovin of Washington state, who sold $ 200,000 in call options on the GameStop share when it was worth less than $ 100 a share. This turned out to be a very bad bet, while r / WallStreetBet users launched a organized effort to pump GameStop and other underperforming stocks, like AMC and BlackBerry, with a nostalgic value that ultimately was quite successful. Like the great sharks of Wall Street understood and joined As a result of the effort led by Reddit, GameStop’s shares climbed to $ 483, which was a disaster for traders short-selling the company’s shares. Iovin was forced to buy back his calls at inflated rates as a result, according to the suit. GameStop now sits at $ 46 per share, again significantly higher at the start of 2021, when it was trading in the $ 19 range.

Gill was one of the main supporters of the GameStop rush on his social media accounts, and according to CNBC, posted on Reddit that he made at least $ 7.8 million on the company’s stock. The lawsuit accuses him of not being a layman, but a licensed stockbroker who deliberately manipulated the company’s stock price to get rich quick.

“Gill’s deceptive and manipulative conduct not only violated numerous industry regulations and rules, but also various securities laws by undermining the integrity of the GameStop stock market,” the class action proposal says, according to Bloomberg. “It caused huge losses not only to those who bought options contracts, but also to those who fell in love with Gill’s act and bought GameStop shares during the market frenzy at heavily priced. swollen.

According to New York Times, the class action proposal cites Gill’s multiple broker licenses and also names the brokerage arm of MassMutual – where Gill worked until a few weeks ago, and which the plaintiffs claim did not properly control its business on the market. The Times also noted that securities regulators in the state of Massachusetts are questioning whether its posts potentially violate the law or industry rules. (The Securities and Exchange Commission has issued vague threats to everyone involved in the speculative frenzy, including the Robinhood stock trading app, but did not actually complete them.)

Gill fights vigorously against claims that he was attempting to manipulate the market to his own advantage. The short squeeze was only possible because hedge funds like Melvin Capital had greedily taken big short positions on GameStop, giving investors the opportunity to make big bucks if the stock rose while hedge funds lost. their shirts. The House Financial Services Committee is hold a hearing Thursday over the whole r / WallStreetBets fiasco, with Gill scheduled to testify. Others should speak understand Vlad Tenev, co-CEO of Robinhood, CEO of Reddit and co-founder Steve Huffman, and Gabriel Plotkin, CEO of Melvin Capital.

In his prepared remarks in the House, Gill claimed that his role as director of financial wellness education at MassMutual had been totally disconnected from his parallel role as a stock commentator and that he truly believed GameStop had “the potential to reinventing itself as the ultimate destination for gamers. within the thriving $ 200 billion gaming industry. Gill added that just a few months ago, in December 2020, his YouTube and Twitter accounts only had a few hundred followers each and he didn’t believe he had the capacity to influence the markets.

“The idea that I have used social media to promote GameStop action to unwitting investors is absurd,” Gill wrote. “I was completely clear that my channel was for educational purposes only and that my aggressive investing style was unlikely to suit most people who view the channel. The fact that other individual investors bought the stock was irrelevant to my thesis – I was focusing on the fundamentals of the business. “

Gill added that “others will have to explain” exactly what happened with GameStop.

“Here’s the thing: I’ve had a little experience and even barely understand these questions,” he writes. “It is alarming how little we know about the inner workings of the market, and I am grateful that this committee is examining what has happened.

Gill’s attorney William Taylor declined to comment to The Times, while MassMutual told the newspaper he was looking into the matter.