Florida federal court this week rejected one part of a proposed three-part class action lawsuit against Robinhood and others for their role in GameStop’s January crazy trading. Investors argued that brokerage firms such as Robinhood had conspired with clearinghouses and market maker Citadel Securities to restrict trading in meme stocks as they gained in value. The judge thought otherwise.
“Collusion alone will not be enough,” wrote Cecilia Altonaga, Chief Justice of the United States District Court for the Southern District of Florida, in a ruling dismissing the antitrust lawsuit. The judge noted that executives at Robinhood and Citadel Securities “exchanged various vague and ambiguous emails” during the stock market shutdown, which looked “somewhat suspicious given the participants and their timing.”
But, as the judge wrote, the conspiracy allegations were not “believable.” The firms had a “legitimate, ongoing business relationship” in which Robinhood directs clients’ trades to Citadel Securities for execution and payment for order flow, which is a common but sometimes controversial agreement.
The case is not closed. There are two more tranches in this litigation, consolidating claims from across the country. Retailers also allege that Robinhood has negligently fulfilled its obligations to customers and violated securities laws.
Maurice Pessa, lead attorney for the negligence tranche, told the DealBook newsletter that his case is based on “completely separate and different legal theories.” Robinhood dropped claims; a decision can be made before the end of the year.