Roaring Kitty Faces Lawsuit Examining Pump and Dump Allegations

• Keith Gill faces a class-action lawsuit for alleged securities fraud involving GameStop stock.
• Plaintiff Martin Radev claims losses from GME shares and options due to Gill’s undisclosed trades and cryptic memes.
• Former prosecutor Eric Rosen believes the lawsuit is “doomed” and could be dismissed with a well-crafted motion.

Keith Gill, known as Roaring Kitty, is facing securities fraud claims in a class-action lawsuit. The lawsuit, filed on June 28 in the Eastern District of New York, alleges Gill orchestrated a “pump and dump” scheme involving GameStop (GME) stocks. The claims are based on a series of social media posts that caused significant stock price fluctuations between May and June.

A former federal prosecutor believes the lawsuit is likely “doomed” to fail. The complaint accuses Gill of failing to adequately disclose his GameStop options trades, which allegedly misled his followers. Plaintiff Martin Radev, represented by law firm Pomerantz, claims he incurred losses after purchasing 25 GME shares and three call options in mid-May.

Gill, who had taken a two-year social media hiatus, reappeared on May 13. He posted a series of cryptic memes on his X account, sparking a 180% surge in GameStop shares. The price soared from $17.46 to $48.75 by the close of trading on May 14.

By June 13, Gill announced he had exercised all 120,000 option calls, realizing millions in gains. He used these gains to acquire more GameStop shares. The lawsuit alleges that Gill did not sufficiently disclose his intent to sell his options, misleading his followers and causing investor losses.

However, Eric Rosen, a former federal prosecutor, argues that the lawsuit is “doomed from its inception.” Rosen, the founding partner at Dynamis LLP, believes the complaint could be easily dismissed if Gill files a “well-crafted” motion to dismiss. Rosen contends that no reasonable investor would expect Gill to hold all his options until expiration.

Moreover, Rosen states that the plaintiff’s claim relies on the price impact of Gill’s posts, not their content. This makes it difficult to prove one’s status as a “reasonable investor” in court. Proving securities fraud requires showing that an investor was intentionally misled. Rosen asserts that Gill’s random memes do not contain inherently provable or disprovable information.