Roaring Kitty Charged with New Lawsuit Over Alleged GameStop Pump and Dump Fraud

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Keith Gill is accused of manipulating GameStop shares via social media.
The lawsuit claims that Gill’s actions led to significant losses for investors.

“Roaring Kitty” Keith Gill is facing a class action lawsuit over his alleged participation in a “pump and dump” scheme related to his social media posts about GameStop. The lawsuit, filed June 28 in the Eastern District of New York alleges that Gill manipulated GameStop’s stock price through his influential online presence between May and June.

The plaintiff accuses Gill of engaging in a pump-and-dump fraud by quietly purchasing a large number of call options on GameStop stock before he posted a meme on May 12 that marked his comeback after three years.

The post was widely interpreted as his renewed interest in GameStop, which caused the stock price to surge by over 74% the next day. Meanwhile, Solana-based memecoins also saw a 500% increase shortly after Gill’s social comeback.

On June 2, Gill returned with a post on Reddit in which he revealed his large stake in GameStop, consisting of 5 million shares and 120,000 call options. According to the complaint, the post caused GameStop’s stock price to increase by more than 70% in pre-market trading the next day.

The filing also cited a report from the Wall Street Journal that showed Gill bought a large number of GameStop options shortly before his May post, raising concerns about potential stock manipulation.

Gill revealed that he exercised all 120,000 call options and increased his holdings in GameStop stock to over 9 million shares. This led to GameStop’s share price dropping by 15.18% over the next three trading sessions.

The plaintiff and other class members alleged that as a result of Gill’s actions, they suffered significant financial losses due to the sharp decline in the market value of GameStop securities.

They said Gill’s market manipulation through social media influence violated federal securities laws. The lawsuit seeks to recover compensation for losses.

“The complaint is probably doomed to failure”

Despite the new allegations, Eric Rosen, a former federal prosecutor and founding partner of Dynamis LLP, expressed skepticism about the lawsuit’s success, being careful it is likely to fail.

Rosen pointed to three weaknesses in the case that will likely be dismissed. According to him, since Gill’s options had an expiration date, it was no secret that he would eventually sell them.

Additionally, Gill’s tweets were not investment advice. According to Rosen, sensible investors would not base their decisions solely on his tweets. Moreover, Gill was not a financial advisor and had no obligation to disclose trading intentions.

“Generally speaking, only financial advisors or fiduciaries need to disclose their positions, intentions or things of that nature. Roaring Kitty is neither. This will also be a hurdle that plaintiffs will have to overcome, and it will be difficult for them to do so,” Rosen noted.