Keith Gill, the stock famed for his role in the 2021 GameStop short-squeeze, is facing securities fraud allegations in a new class-action lawsuit. The suit, filed on June 28 in the Eastern District of New York, accuses Gill of running a “pump and dump” scheme through social media posts that caused significant volatility in GameStop (GME) stock prices between May and June.
The lawsuit, led by plaintiff Martin Radev and represented by the Pomerantz law firm, claims Gill misled investors by not properly disclosing his transactions involving GameStop options calls.
Radev, who bought 25 GME shares and three call options in mid-May, alleges he suffered losses due to Gill’s actions.
Gill, who had been silent on social media for two years, returned on May 13 with cryptic posts on his X account, triggering a 180% rise in GameStop’s stock price from $17.46 to $48.75 in a single day.
On June 2, Gill revealed on Reddit that he held a substantial GameStop position, including 5 million shares and 120,000 call options set to expire on June 21, 2024. This disclosure led to another surge in GME’s price, closing above $45 that day.
By June 13, Gill announced he had exercised all his 120,000 call options, making millions in gains, which he used to buy more GameStop shares. The lawsuit argues that Gill’s failure to announce his intent to sell his options misled his followers, causing financial harm to some investors.
However, former federal prosecutor Eric Rosen believes the lawsuit will likely fail. In a June 30 blog post, Rosen explained that no reasonable investor would expect Gill to hold his options until their exact expiry date.
Additionally, Rosen argued that it’s unreasonable to base investment decisions solely on cryptic social media posts by someone named “Roaring Kitty.” Rosen emphasized that proving fraud requires clear evidence of intentional deception, which he believes is lacking in this case.
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