Robinhood is inching closer to a settlement with investors who initiated a lawsuit against the trading platform over its decision to halt trading of certain meme stocks, including GameStop, in 2021.

The Robinhood meme stock lawsuit is expected to be settled and dismissed in two weeks. Moreover, the HOOD stock gained significantly amid the recent update.

Settlement Details and Court Filing

According to a filing made on Tuesday, May 28, 2024, in Florida Southern District Court, Robinhood's attorneys stated that they have engaged in the settlement with affected investors.

The settlement process is nearly complete, and Robinhood expects it to be finalized soon, leading to the dismissal of the lawsuit within the next two weeks.

However, the filing did not disclose specific details of the settlement. The Robinhood lawsuit, filed in 2021, is led by plaintiff Blue Laine-Beveridge.

The plaintiff accused Robinhood of market manipulation that allegedly resulted in substantial financial losses for investors.

The complaint stated that Robinhood' unlawfully manipulated market prices' by restricting the purchase of specific stocks from January 28 to February 4, 2021.

Impact on Meme Stocks

The affected meme stocks included popular ones like GameStop and AMC Entertainment (AMC). It also impacted investors involved in trading stocks of Bed Bath & Beyond, BlackBerry, Nokia, trivago, Koss, Express Inc., and Tootsie Roll.

This investor lawsuit is part of a broader legal challenge across multiple U.S. jurisdictions concerning Robinhood's actions during the meme stock frenzy.

Broader Legal Context

The settlement news comes after United States District Judge Cecilia Altonaga denied the investors' request to file a new motion for class certification on April 19, 2024.

They witnessed a similar denial in November of the previous year. Meme stocks like GameStop and AMC are known for their popularity among retail investors, who are often driven by social media trends.

GameStop's stock price surged dramatically in January 2021 due to a short squeeze. This led to significant losses for hedge funds and other short sellers, while some retail investors saw massive gains.

At the time, Robinhood was slapped with a lawsuit for halting the GME trading.

Return of 'Roaring Kitty'

This movement was primarily attributed to Keith Gill, also known as 'Roaring Kitty,' who recently returned to the social media platform X on May 13, 2024, posting a series of enigmatic memes.

His return generated excitement among traders, and GameStop stock closed at $48.75 on May 14, its highest close since late 2021.

However, the stock price has declined by over half, closing down 10.68% on Wednesday, May 29 at $21.24.

Furthermore, it witnessed an additional 2.17% drop in after-hours trading to $20.78. Meanwhile, the Robinhood stock surged 3%, closing at $21.08 on Wednesday.