Roaring Kitty Securities Fraud Lawsuit: Meme Stocks Decline
Article Summary
Keith Gill, also known as Roaring Kitty, is in a tough spot as his favorite meme stocks, GameStop and Chewy, are losing value. Chewy's stock fell over 6.5% on Monday, despite his $245 million investment, while GameStop's shares dropped by 5.4%. This decline comes as Gill faces a lawsuit in New York, accusing him of securities fraud for his social media posts about GameStop.
Gill gained fame by leading retail traders into struggling stocks to trigger short squeezes, forcing short-sellers to cover their positions and driving stock prices higher. This tactic was particularly effective during the pandemic, but the momentum behind meme stocks is now waning. Factors such as higher interest rates, poor financial performance of meme stocks, and a cooling U.S. economy are contributing to their underperformance.
The lawsuit, filed by Martin Radev, alleges that Gill engaged in a "pump and dump" scheme, causing Radev material losses. However, defense attorney Eric Rosen believes the lawsuit is likely to fail. Rosen argues that the plaintiff must prove that he bought GameStop stock based on false statements by Gill, which is difficult given that the lawsuit is based on a meme Gill posted. Additionally, the plaintiff must demonstrate that a reasonable investor would interpret Gill's social media posts as investment advice, which Rosen contends is unlikely.
Rosen also notes that the plaintiff must prove Gill had a duty to disclose his intent to sell, a requirement typically reserved for financial advisors or fiduciaries. Given these challenges, the lawsuit against Gill appears to have little chance of success. Despite the current setbacks, the meme stock trend may only be experiencing a temporary lull.
