https://www.dynamisllp.com/knowledge/roaring-kitty-sued-for-securities-fraud
Roaring Kitty sued for alleged GameStop, $GME, securities fraud
“Roaring Kitty” Sued for 10(b)(5) Securities Fraud
Roaring Kitty sued for Securities Fraud Related to his recent Tweets and Reddit posts regarding his ownership stake in Gamestop
On Friday, June 28, 2024, “Roaring Kitty,” the social media icon, was sued in the Eastern District of New York for securities fraud related to his recent tweets about Gamestop. This blog post provides a quick overview of the case and a brief analysis of the major issues. Although similar to the cases Dynamis has handled on behalf of the Atlas Traders and “AlexDeLarge”, there are some important distinctions. A copy of the complaint, filed by Martin Radev on behalf of others similarly situated, is set forth below. For the reasons articulated, as well as many others, this complaint is likely doomed from its inception and susceptible to dismissal if Roaring Kitty files a well-crafted motion to dismiss.
Factual Overview
As many people know, Gamestop (GME) has been very volatile as of late, with major volatility occurring as a result of posts by Roaring Kitty on May 12, 2024.
Initial Social Media Activity (May 12, 2024): Keith Patrick Gill, known as “Roaring Kitty” and “DeepF***ingValue,” made a post via his Roaring Kitty account on the social media platform X (formerly Twitter) for the first time in nearly three years. The post was a meme showing a gamer in a suit, leaning forward in his chair in seeming concentration. Although hardly a “factual post,” this post was widely interpreted as Gill paying attention to GameStop securities again. On May 13, 2024, the first trading day after Gill’s first post, GME went from approximately $17/share to nearly $50 by the close of trading on May 14, 2024, after Gill posted multiple additional tweets that appeared to reflect a renewed interest in GME. Notably, these tweets were generally devoid of analysis and texts, and were largely memes susceptible to multiple interpretations.
Subsequent Social Media Activity (June 2, 2024): Gill posted on Reddit through his DFV account, disclosing his large position in GameStop securities, including 120,000 GameStop call options with an expiry date of June 21, 2024 and 5 million shares of GameStop stock. This post garnered significant attention with approximately 108,000 upvotes, 21,000 comments, and 12,000 reactions. It was interpreted by his followers as a rallying cry to invest in GameStop securities. The price of GME launched to the moon once again, closing above $45. Subsequently, in had been revealed by the WSJ that these options had been purchased shortly before the May 12, 2024 post, which has been viewed nearly 30 million times.
Market Impact and Alleged Deceptive Activity: Following Gill’s social media posts, there was a surge in the price of GameStop securities. However, it is alleged that by June 13, 2024, Gill had quietly sold or exercised all 120,000 of his GameStop call options, realizing millions of dollars in gains. He allegedly did this without disclosing his intent to sell, thereby misleading his followers and the market.
SEC Investigation and Market Reaction (June 4, 2024): News emerged that the SEC was investigating Gill's activities, specifically his trading in GameStop call options around the time of his social media posts. Following this news, GameStop’s stock price fell $1.50 per share, or 5.36%, closing at $26.50 per share.
Further Market Impact (June 13, 2024): On this date, during after-market hours, Gill posted another screenshot of his GameStop portfolio on Reddit, showing that his portfolio no longer included the 120,000 GameStop call options. This indicated he had sold these options, although he accumulated additional stock, which further impacted the market.