Keith ‘Roaring Kitty’ Gill Faces New Securities Fraud Allegations

NAIROBI (CoinChapter.com) — Keith Gill, also known as ‘Roaring Kitty,’ faces new securities fraud allegations related to his social media posts. Filed in the Eastern District of New York on June 28, the class-action lawsuit accuses Gill of orchestrating a “pump and dump” scheme, causing financial losses for some investors.

The complaint alleges Gill orchestrated a “pump and dump” scheme through a series of social media posts starting May 13. Plaintiff Martin Radev, represented by Pomerantz law firm, claims Gill misled followers by not disclosing the purchase and sale of his GameStop (GME) options calls. Radev purchased 25 GME shares and three call options, reportedly influenced by Gill’s posts, which resulted in financial losses.

The lawsuit argues Gill’s social media activity, including cryptic memes on his X account, sparked a 180% surge in GME stock on May 14. Further, on June 2, Gill disclosed a significant position in GameStop, including 5 million shares and 120,000 call options expiring on June 21, 2024. This disclosure led to another price surge, with GME closing above $45.

GameStop Corp (GME) shares closed at $24.69 on July 1, marking a 1.59% decrease, or a drop of $0.40 from the previous day. The pre-market trading showed a further decline of 0.49%, with shares priced at $24.57, indicating ongoing market turbulence.

Legal Expert’s Perspective on the Lawsuit

The complaint alleges that Gill’s failure to disclose his intent to sell his options calls misled investors. However, Eric Rosen, a former federal prosecutor and current partner at Dynamis LLP, believes the lawsuit will likely fail. In a June 30 blog post, Rosen argued that the claims lack substance and would likely be dismissed if Gill files a strong motion to dismiss.

Rosen contends that it is unreasonable to expect Gill to hold onto all his options until their expiration. He also notes that proving fraud requires demonstrating that the accused intentionally misled investors. Gill’s random social media posts, often memes, do not constitute actionable misinformation under securities law.

Moreover, Rosen highlighted that the plaintiff’s claim relies heavily on the price impact of Roaring Kitty’s posts rather than their content. This approach undermines the plaintiff’s position, making it difficult to establish a basis for reasonable investor reliance.

Potential Implications of the Roaring Kitty Lawsuit

The outcome of this case could have broader implications for social media influencers and retail investors. If the lawsuit succeeds, it might set a precedent for holding individuals accountable for market-moving social media activity. However, Rosen’s assessment suggests that the case is unlikely to reach that stage.

The lawsuit against Gill underscores the volatility and risks associated with social media-driven trading. It also highlights the importance of due diligence and transparency in financial markets. While Gill’s posts significantly influenced GameStop’s stock price, the legal burden of proving securities fraud remains high.

Keith Gill maintains his innocence, asserting transparency in his investment strategies. The legal proceedings will determine the validity of the claims and may impact the relationship between social media and market dynamics.