As Reuters reported Monday (June 1), the court is deciding whether to hear Robinhood’s request to quash a lawsuit that accuses the company of misleading investors.
The online financial platform is appealing a lower court ruling that revived a proposed class action suit by plaintiffs who claim Robinhood failed to properly disclose the negative impact of a meme stock and cryptocurrency frenzy that faded before its listing.
Plaintiffs allege that Robinhood made false and misleading statements and omissions in its IPO documents by not disclosing its dependence on fad trading in social media-driven meme stocks such as GameStop and the cryptocurrency Dogecoin. Those stocks began to wane months before the IPO, potentially hurting its financial prospects, the suit claims.
Reuters added that Robinhood has countered that because of the trading volume spikes at the start of 2021, its IPO documents included detailed disclosures about future risks and warned that the meme-stock and Dogecoin enthusiasm could subside.
U.S. District Judge Edward Chen in San Francisco dismissed the suit in 2024 after finding that the plaintiffs’ claims of Robinhood’s failings were not enough to let the case move forward. But the 9th U.S. Circuit Court of Appeals overruled Chen’s findings last year.
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According to Reuters, Robinhood is urging the Supreme Court to take up the case, arguing the appeals court ruling exposes companies to large liabilities while imposing disclosure requirements that could saddle investors in trivial information.
In other Robinhood news, last week saw a report that the company’s participation in the Trump Accounts program may lead to it to other public-sector partnerships.
The federal program could function as a model for similar initiatives, and some states and other public-sector organizations have contacted Robinhood about collaborating on similar projects, Robinhood Chief Financial Officer Shiv Verma told Bloomberg News.
“We’ve shown we know how to work with the U.S. Treasury, which is a very high bar,” Verma said. “I think it’s given a lot of other folks interest that maybe we can help them too.”
Trump Accounts are designed to provide tax-advantaged investment accounts for U.S. citizens under the age of 18. The program launched in April with BNY managing the initial accounts, and Robinhood serving as brokerage and initial trustee.
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