Keith Gill Faces Lawsuit Over GameStop Trades

Keith Gill, a stock trader known for the 2021 GameStop short squeeze, has been sued in the Eastern District of New York, accused of allegedly orchestrating a 'pump and dump' scheme.

The complaint states that Gill's social media posts between May and June caused GameStop (GME) stocks to whipsaw violently.

The lawsuit accuses Gill of failing to adequately disclose the purchase and sales of his GameStop options calls. This allegedly misled his followers, resulting in losses for some investors.

Represented by law firm Pomerantz, plaintiff Martin Radev claimed he was injured by the alleged 'pump and dump' after purchasing 25 shares in GME and three call options starting mid-May.

Breaking Down Roaring Kitty's Return

Gill, who had been on a two-year social media hiatus, resurfaced on May 13. He posted a series of cryptic memes to his X account, which, according to crypto analysts, caused GameStop shares to surge by 180% from $17.46 to $48.75 on May 14.

In a June 2 post on Reddit, Gill disclosed a sizeable position in GameStop. This included 5 million shares of GME stock and 120,000 GME call options with a June 21, 2024 expiry date. This sent the price of GME surging once again, closing above $45 on the day.

By June 13, Gill shared that he had exercised all 120,000 options calls, realizing millions of dollars in gains. Notably, he had used these gains to accumulate further GameStop shares.

The lawsuit claims that Gill needed to sufficiently disclose his intent to sell his options calls ahead of time. This allegedly misled his followers and other market participants, resulting in losses for investors.

Complaint is Likely 'Doomed,' Says Lawyer

In a June 30 blog post, former federal prosecutor Eric Rosen commented on the lawsuit. Rosen, the founding partner at Dynamis LLP, stated that the class-action complaint is 'doomed from its inception.' He believes it could be easily dismissed if Gill were to file a 'well-crafted' motion to dismiss.

Rosen argued that the claim Gill should have disclosed his intent to sell his options would not hold up well in court. He stated that no 'reasonable person, let alone a reasonable investor,' would expect Gill to hold onto all of their options until the exact time and date of their expiry.

'It is unreasonable to purchase securities simply because an individual named Roaring Kitty posted innocuous tweets on social media,' said Rosen.

Rosen emphasized that the most critical part of pursuing a fraud case is proving that a fraudster has lied or intentionally misled investors by failing to disclose important information.

He explained it would be tough to get past a judge, as a series of random memes posted by someone called 'Roaring Kitty' on social media are not claims containing information that can be inherently proven or disproven.