The individual considered responsible for sparking the price frenzy around shares of GameStop “exaggerated and misrepresented” the stock’s prospects while attempting to disguise himself as an amateur online trader, causing “enormous losses” for many who relied on his advice, a proposed class action alleges.
Defendant Keith Patrick Gill, known as “Roaring Kitty” on YouTube and Twitter and “DeepF***ingValue” on Reddit, fashioned himself as both “an amateur, everyday fellow, who simply was looking out for the little guy” and “a kind of Robin Hood” in order to motivate traders and drive up the price of GameStop shares over the course of several months, the 36-page securities lawsuit claims. In truth, however, Gill “is no amateur (and no Robin Hood),” as he has reportedly worked for years as an investment and financial industry professional and has “extensive securities licenses and qualifications,” the lawsuit says.
“Indeed, at the time Gill was inciting the market frenzy with his fake persona, he was licensed by [MML Investors Services, LLC] as a registered representative (i.e., a securities broker), and he was employed by MassMutual as a ‘Financial Wellness Director,’” the complaint alleges.
Gill’s alleged conduct, that is, inciting a market frenzy by advocating for amateur traders to get back at big hedge funds by buying GameStop shares to thereby harm their short positions, amounts not only to violations of numerous industry regulations and rules, but also securities laws meant to prevent individuals from undermining the integrity of the market, the suit says.
“He caused enormous losses not only to those who bought options contracts, but also to those who fell for Gill’s act and bought GameStop stock during the market frenzy at greatly inflated prices,” the lawsuit claims, noting that Gill himself was able to make “tens of millions of dollars” on his original investment.
In a section titled “The Real Keith Gill,” the lawsuit says the man has for more than a decade worked as a financial industry and investment professional. According to the complaint, Gill has held since at least 2012 various licenses as an investment advisor, securities broker, commodity futures and options broker; licenses in securities principal and supervisory management; and a license as a chartered financial analyst, which the suit says is “considered the highest level of legal and regulatory recognition of finance-related qualifications.”
The defendant’s various licenses permit him to sell and trade in “a variety of securities, including options,” and one particular license allows him to serve as a principal broker and dealer and supervise other brokers to ensure their compliance with applicable securities laws and regulations, the lawsuit says.
“Unquestionably, Gill holds extensive licenses in the securities industry, understands sophisticated aspect [sic] of the securities industry, including the markets, and has extensive knowledge of the securities laws and regulations,” the complaint reads.
For their part, co-defendants MML and MassMutual had legal and regulatory obligations to keep tabs on Gill, yet “failed to do so even though Gill’s conduct was continuing and highly public,” the suit says. According to the lawsuit, the defendants’ obligation to monitor Gill “extends to his use of social media and his compliance with the laws, regulations, and rules that apply to licensed securities professionals, including those laws, rules, and regulations governing communications to the public regarding securities.”
The lawsuit alleges Gill, in the year leading up to the GameStop price frenzy, created through his online personas a “far-reaching and wildly successful social media campaign” aimed to drive up share prices. As the case tells it, the plan worked flawlessly.
From the complaint:
“The seeds of an idea Gill proliferated to his now hundreds of thousands of followers—namely, to exponentially drive up the price of GameStop shares—would ultimately germinate into a lucrative windfall for himself, at the expense of Plaintiff and the Class Members.
Indeed, Gill has been rightfully characterized as ‘[t]he investor who helped direct the world’s attention to GameStop, leading a horde of online followers in a bizarre market rally that made and lost fortunes from one day to the next,” and “the force behind the quadruple-digit gains in shares of the videogame retailer GameStop[.]’
It was Gill’s ‘advocacy’ that, according to many online investors, ‘helped turn them into a force powerful enough to cause big losses for established hedge funds and, for the moment, turn the investing world upside down.’”
According to the lawsuit, Gill’s “legion of fans,” including many who frequent the r/WallStreetBets subreddit, subscribe to his YouTube channel and follow him on Twitter, were “either unaware or unconcerned” that they were part of a plan to collectively manipulate the price of GameStop shares.
With regard to r/WallStreetBets, the suit says the community has an “undeniable influence” on the financial markets, as illustrated by the GameStop price spikes. Indeed, the lawsuit claims Gill, by catering to the r/WallStreetBets community with a year-long campaign centered on GameStop, was “able to achieve his objectives to the tune of, on paper, approximately $48 million.”
“While initially met with skepticism, Gill’s posts garnered a cult-like following, and he eventually was ordained a messianic figure within the WSB community,” the case says.
The lawsuit looks to represent all individuals and entities nationwide who, between January 22 and February 2, 2021, either bought GameStop shares, purchased an option on GameStop shares, had an option for GameStop shares called away from them, purchased GameStop shares to cover a short position, or had their option expire and suffered losses as a result of any such transactions.
Gill was subpoenaed earlier this month to appear before the securities unit of the Massachusetts Secretary of the Commonwealth in late February given his registration in the state. Gill is also set to testify before the United States House Financial Service Committee on February 18 over the GameStop situation. In pre-released testimony, Gill has called accusations of wrongdoing on his part “preposterous.”
“I was abundantly clear that my channel was for educational purposes only, and that my aggressive style of investing was unlikely to be suitable for most folks checking out the channel,” Gill’s testimony states. “Whether other individual investors bought the stock was irrelevant to my thesis—my focus was on the fundamentals of the business.”
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