In 2021, stock investor Keith Gill, known for the speculation process on GameStop shares, faced securities fraud allegations in a class action lawsuit due to a series of recent social media posts about the sharp drop in GameStop share prices between May and June. However, a former federal prosecutor believes the case is likely doomed to fail.
What is Happening with GameStop Shares?
On June 28, a complaint was filed in the United States District Court for the Eastern District of New York, aiming to sue Gill for allegedly orchestrating a pump and dump scheme through a series of social media posts starting from May 13.
The complaint alleges that Gill committed securities fraud by not adequately disclosing the buying and selling of GameStop option calls, misleading his followers, and resulting in some investors suffering losses. Represented by the Pomerantz law firm, plaintiff Martin Radev claimed he suffered losses due to the alleged pump and dump after purchasing 25 GameStop shares and three call options from mid-May.
Gill’s Notable Post
Gill posted a series of cryptic memes on his social media account on May 13 after a two-year hiatus, causing a 180% increase in GameStop’s stock price, which soared from $17.46 to $48.75 by the close of trading in May.
On June 2, Gill revealed in a Reddit post that he held a significant position in GameStop, including five million GameStop shares and 120,000 call options expiring on June 21. This caused GameStop’s price to rise again, closing the day above $45.
As of June 13, Gill shared that he had exercised all 120,000 call options, earning millions of dollars. He notably used these gains to accumulate more GameStop shares. The lawsuit alleges that Gill did not adequately disclose his intention to sell the options in advance, misleading his followers and other market participants, leading to investor losses.
