Robinhood Securities, LLC’s Motion to Dismiss the Federal

Date: 2022-01-07

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 21-MD-2989-ALTONAGA/TORRES
In re:
JANUARY 2021 SHORT SQUEEZE
TRADING LITIGATION
_____________________________________/
This Document Relates to the Federal Securities Tranche

DEFENDANTS ROBINHOOD MARKETS, INC., ROBINHOOD FINANCIAL LLC AND
ROBINHOOD SECURITIES, LLC’S MOTION TO DISMISS THE FEDERAL
SECURITIES TRANCHE COMPLAINT AND INCORPORATED
MEMORANDUM OF LAW

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TABLE OF CONTENTS
TABLE OF AUTHORITIES .......................................................................................................... ii
PRELIMINARY STATEMENT .....................................................................................................1
BACKGROUND .............................................................................................................................4
LEGAL STANDARD ....................................................................................................................11
ARGUMENT .................................................................................................................................13
I.
PLAINTIFFS DO NOT PLEAD MARKET MANIPULATION UNDER EITHER
SECTION 9(a) OR SECTION 10(b) OF THE SECURITIES EXCHANGE ACT...........13
A.
Plaintiffs Do Not Adequately Plead Manipulative Conduct. .................................14
1.
Plaintiffs Do Not Allege that Robinhood Deceived Investors About
Its Purchase Restrictions. ...........................................................................15
2.
Plaintiffs Do Not Allege a Violation of Any of the Six Subsections
of Section 9(a). ...........................................................................................19
B.
Plaintiffs Do Not Adequately Plead the Requisite State of Mind. .........................23
II.
PLAINTIFFS DO NOT PLEAD A MISREPRESENTATION CLAIM UNDER
SECTION 10(b) OF THE SECURITIES EXCHANGE ACT. .........................................26
A.
Plaintiffs Cannot Bring a Section 10(b) Claim Based on Robinhood’s
Statements About Its Own Business To Recover Alleged Losses from
Plaintiffs’ Sale of Securities of Other Companies. ................................................28
1.
Plaintiffs Lack Statutory Standing. ............................................................28
2.
Plaintiffs Cannot Satisfy the “In Connection With” Element. ...................30
B.
Plaintiffs Do Not Adequately Plead Other Essential Elements of Their
Section 10(b) Misrepresentation Claim. ................................................................31
1.
Plaintiffs Do Not Adequately Plead Any False or Misleading
Statements. .................................................................................................31
2.
Plaintiffs Do Not Adequately Plead Loss Causation. ................................34
3.
Plaintiffs Do Not Adequately Plead Scienter.............................................36
III.
PLAINTIFFS’ CLAIMS SHOULD BE DISMISSED WITH PREJUDICE. ....................39
CONCLUSION ..............................................................................................................................39

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TABLE OF AUTHORITIES
Page(s)
Cases
Ashcroft v. Iqbal, 556 U.S. 662 (2009) ..........................................................................................11
ATSI Communications, Inc. v. Shaar Fund, Ltd., 493 F.3d 87 (2d Cir. 2007) ...................... passim
Baum v. Phillips, Appel & Walden, Inc., 648 F. Supp. 1518 (S.D.N.Y. 1986), aff’d
sub nom. Asch v. Philips, Appel & Walden, Inc., 867 F.2d 776 (2d Cir. 1989) ................20, 24
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ..........................................................................11
Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975) ..............................................29, 30
Brady v. Top Ships Inc., No. 17-cv-4987 (BMC), 2019 WL 3553999
(E.D.N.Y. Aug. 5, 2019), aff’d sub nom. Onel v. Top Ships, Inc.,
806 F. App’x 64 (2d Cir. 2020) ...................................................................................16, 18, 23
Bryant v. Avado Brands, Inc., 187 F.3d 1271 (11th Cir. 1999) .................................................6, 13
Carvelli v. Ocwen Fin. Corp., 934 F.3d 1307 (11th Cir. 2019) .....................................................12
Chill v. Gen. Elec. Co., 101 F.3d 263, 268 (2d Cir. 1996) ............................................................37
Cohen v. Stevanovich, 722 F. Supp. 2d 416 (S.D.N.Y. 2010) .....................................12, 17, 19, 26
Connolly v. Havens, 763 F. Supp. 6 (S.D.N.Y. 1991) ...................................................................12
Crane Co. v. Westinghouse Air Brake Co., 419 F.2d 787 (2d Cir. 1969) ................................16, 24
Crummere v. Smith Barney, Harris, Upham & Co., 624 F. Supp. 751
(S.D.N.Y. 1985) .......................................................................................................................30
D.A.M. v. Barr, 474 F. Supp. 3d 45 (D.D.C. 2020) .....................................................................5, 7
Dura Pharms., Inc. v. Broudo, 544 U.S. 336 (2005) .........................................................34, 35, 36
Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976)..................................................................13, 19
Fezzani v. Bear, Stearns & Co., 384 F. Supp. 2d 618 (S.D.N.Y. 2004) ........................................12
FindWhat Investor Grp. v. FindWhat.com, 658 F.3d 1282 (11th Cir. 2011) ........................ passim
GFL Advantage Fund, Ltd. v. Colkitt, 272 F.3d 189 (3d Cir. 2001) .............................................15
Gurary v. Winehouse, 190 F.3d 37 (2d Cir. 1999) ........................................................................15
Case 1:21-md-02989-CMA Document 449 Entered on FLSD Docket 01/07/2022 Page 3 of 47

Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258 (2014) ...............................................27
Harbinger Capital Partners LLC v. Deere & Co., 632 F. App’x 653
(2d Cir. 2015) ...........................................................................................................................28
Harris v. Ivax Corp., 182 F.3d 799 (11th Cir. 1999) .....................................................................32
Henningsen v. ADT Corp., 161 F. Supp. 3d 1161 (S.D. Fla. 2015) ........................................31, 38
I.B. Trading, Inc. v. Tripoint Glob. Equities, LLC, 280 F. Supp. 3d 524
(S.D.N.Y. 2017) .......................................................................................................................14
In re Altisource Portfolio Solutions, S.A. Securities Litigation, No. 14-81156,
2015 WL 12001262 (S.D. Fla. Sept. 4, 2015) .........................................................................29
In re Galectin Therapeutics, Inc. Sec. Litig., 843 F.3d 1257 (11th Cir. 2016) ..............................13
In re GeoPharma, Inc. Sec. Litig., 399 F. Supp. 2d 432 (S.D.N.Y. 2005) ..............................38, 39
In re Merrill Lynch Auction Rate Sec. Litig., 704 F. Supp. 2d 378
(S.D.N.Y. 2010), aff’d sub nom. Wilson v. Merrill Lynch & Co., Inc.,
671 F.3d 120 (2d Cir. 2011).....................................................................................................17
In re Nortel Networks Corp. Sec. Litig., 238 F. Supp. 2d 613 (S.D.N.Y. 2003) ...........................30
In re Williams Sec. Litig.–WCG Subclass, 558 F.3d 1130 (10th Cir. 2009)..................................34
Janus Capital Group v. First Derivative Traders, 564 U.S. 135 (2011) .......................................29
Kraft v. Third Coast Midstream, No. 19-CV-9398 (LJL), 2021 WL 860987
(S.D.N.Y. Mar. 8, 2021) ..........................................................................................................16
La Grasta v. First Union Sec., Inc., 358 F.3d 840 (11th Cir. 2004) ................................................6
Lentell v. Merrill Lynch & Co., 396 F.3d 161 (2d Cir. 2005) ........................................................35
Luce v. Edelstein, 802 F.2d 49 (2d Cir. 1986) ...............................................................................27
Menora Mivtachim Ins. Ltd. v. Int’l Flavors & Fragrances Inc.,
No. 19 CIV. 7536, 2021 WL 1199035 (S.D.N.Y. Mar. 30, 2021) ....................................29, 30
Metzler Inv. GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049 (9th Cir. 2008) ........................27
Meyer v. Greene, 710 F.3d 1189 (11th Cir. 2013) ...................................................................34, 35
Mills v. Polar Molecular Corp., 12 F.3d 1170 (2d Cir. 1993).......................................................31
Mizzaro v. Home Depot, Inc., 544 F.3d 1230 (11th Cir. 2008) .....................................................13
Case 1:21-md-02989-CMA Document 449 Entered on FLSD Docket 01/07/2022 Page 4 of 47

Ontario Public Service Employees Union Pension Trust Fund v.
Nortel Networks Corp., 369 F.3d 27 (2d Cir. 2004) ..........................................................28, 29
Panfil v. ACC Corp., 768 F. Supp. 54 (W.D.N.Y. 1991) ..................................................21, 22, 24
Pelletier v. Stuart-James Co., 863 F.2d 1550 (11th Cir. 1989) .....................................................30
Pross v. Katz, 784 F.2d 455 (2d Cir. 1986) ...................................................................................30
Ray v. Lehman Bros. Kuhn Loeb, 624 F. Supp. 16 (N.D. Ga. 1984) .............................................24
Robbins v. Koger Properties, Inc., 116 F.3d 1441 (11th Cir. 1997)..............................................34
Santa Fe Indus., Inc. v. Green, 430 U.S. 462 (1977) .....................................................................15
Saxe v. E.F. Hutton & Co., 789 F.2d 105 (2d Cir. 1986) ..............................................................31
SEC v. Lek Sec. Corp., 276 F. Supp. 3d 49 (S.D.N.Y. 2017) ........................................................20
SEC v. Malenfant, 784 F. Supp. 141 (S.D.N.Y. 1992) ..................................................................15
SEC v. Resch-Cassin & Co., 362 F. Supp. 964 (S.D.N.Y. 1973) ............................................15, 24
South Cherry Street, LLC v. Hennessee Group LLC, 573 F.3d 98 (2d Cir. 2009) ........................23
Spencer Cos. v. Agency Rent-A-Car, Inc., No. 81-2097-S, 1981 WL 1680
(D. Mass. Sept. 21, 1981) ........................................................................................................20
Sterne, Agee & Leach, Inc. v. Nat’l Sec. Clearing Corp., No. CV-07-BE-909-S,
2008 WL 11424178 (N.D. Ala. Sept. 30, 2008) ......................................................................12
Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148 (2008) ...........................29
Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308 (2007) .......................................12, 26, 38
Trane Co. v. O’Connor Sec., 561 F. Supp. 301 (S.D.N.Y. 1983)......................................17, 23, 25
Univ. Express, Inc. v. SEC, 177 F. App’x 52 (11th Cir. 2006) ......................................................17
Urcuyo v. Invertec Corp., No. 05-22291-CIV, 2006 WL 8433171
(S.D. Fla. May 2, 2006) ...........................................................................................................30
Wilson v. Merrill Lynch & Co., 671 F.3d 120 (2d Cir. 2011) ........................................................15
Y-GAR Cap. LLC v. Credit Suisse Grp. AG, No. 19 Civ. 2827 (AT),
2020 WL 71163 (S.D.N.Y. Jan. 2, 2020) ................................................................................22
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Statutes & Rules
15 U.S.C. § 78i ...................................................................................................................... passim
15 U.S.C. § 78j ...................................................................................................................... passim
15 U.S.C. § 78u-4 .................................................................................................................. passim
17 C.F.R. § 240.10b-5 ............................................................................................................ passim
17 C.F.R. § 240.17Ad-22 .................................................................................................................4
Fed. R. Civ. P. 9 ..................................................................................................................... passim
Fed. R. Civ. P. 12 .......................................................................................................................1, 11
Fed. R. Evid. 201 .............................................................................................................................5
Other Authorities
62 Fed. Reg. 520-01 (Jan. 3, 1997) ................................................................................................22
Order Dismissing the Antitrust Amended Complaint, In re January 2021 Short
Squeeze Trading Litigation, 21-2989-MDL-ALTONAGA/Torres
(S.D. Fla. Nov. 17, 2021), ECF No. 438 ...............................................................25, 31, 32, 37
Securities and Exchange Comm’n, Securities Exchange Act Release No. 4163
(Sept. 16, 1948) ........................................................................................................................23
Securities and Exchange Comm’n, “Thinking About Investing in the Latest Hot
Stock?” (Jan. 30, 2021) (“Jan. 30 SEC Statement”), available at
https://www.sec.gov/oiea/investor-alerts-and-bulletins/risks-short-term-
trading-based-social-media-investor-alert ...............................................................................17

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Pursuant to Federal Rule of Civil Procedure 12(b)(6), Defendants Robinhood
Markets, Inc., Robinhood Financial LLC and Robinhood Securities, LLC (together,
“Robinhood”) respectfully submit this memorandum of law in support of their Motion to
Dismiss the Amended Consolidated Class Action Complaint for the Federal Securities Tranche
(“Compl.”) (ECF No. 446) for failure to state a claim.
PRELIMINARY STATEMENT
Plaintiffs in this tranche of the MDL bring federal securities claims against
Robinhood, alleging market manipulation and fraudulent misrepresentations. Plaintiffs’ claims
fail because the securities laws do not prohibit the conduct alleged here.
The market manipulation claims fail for a number of reasons, most fundamentally
because Robinhood publicly disclosed the purchase restrictions it temporarily imposed on the
volatile stocks at issue. As a result, Plaintiffs do not—and cannot—state a claim for market
manipulation, which necessarily requires a defendant to deceive the market about its conduct.
Separately, Plaintiffs’ misrepresentation claim fails for numerous reasons, but the
most basic reason is that the alleged misstatements were made by Robinhood about Robinhood,
not about any company in which Plaintiffs held stock. At the time of the alleged
misrepresentations, Plaintiffs did not hold Robinhood stock. They held stock of various other
companies. In these circumstances, Plaintiffs do not—and cannot—state a claim for fraudulent
misrepresentation.
As this Court is now well aware, the events of January 2021 led to unprecedented
trading volatility for a number of “meme” stocks. Trading volume rapidly ratcheted up over the
course of several days as retail investors sought to effect a short squeeze in stocks perceived to
be the target of short selling by hedge funds. As a result, trading volume and volatility in several
stocks reached historic levels on January 27 and 28, 2021. This led the National Securities
Clearing Corporation (“NSCC”), early in the morning on January 28, 2021, to impose large
collateral requirements on its members to cover the trade orders and risk, including an
unprecedented $3 billion deposit requirement for Robinhood Securities. Despite various
proactive efforts over the preceding days to mitigate the volatility, Robinhood Securities had no
choice but to implement a “position closing only” restriction (a “PCO”) on 13 of the most
volatile stocks. The PCO temporarily restricted purchases of the stocks at issue. It did not
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restrict sales of those stocks. Robinhood lifted the PCO restriction for those 13 stocks after only
a day. For the next five trading days, Robinhood Securities maintained purchasing limits that
temporarily capped the number of shares of certain volatile stocks a customer could hold on
Robinhood’s platform. Robinhood publicly announced each of those purchase limits on its
website, which it regularly updated as Robinhood Securities adjusted those limits. By Friday,
February 5, 2021, Robinhood Securities had lifted all of the purchase limits.
Plaintiffs traded in the meme stocks both during and after the January 2021 short
squeeze and now seek to blame Robinhood for losses from their decision to sell some of those
stocks while Robinhood’s PCO was in place. Plaintiffs bring their claims on behalf of a putative
class of all investors in the United States—including non-Robinhood customers, with whom
Robinhood never interacted—who held any of the nine Affected Stocks on January 27, 2021, and
sold shares of those stocks at a loss during the alleged Class Period of the six trading days from
January 28 through February 4, 2021. Of course, it was Plaintiffs’ decision to sell shares when
they did; Robinhood did nothing to force them to sell. Indeed, for many of the stocks at issue,
Plaintiffs could have sold their shares at a profit during the alleged Class Period, and Lead
Plaintiff Laine-Beveridge did just that. In any event, Plaintiffs fail entirely to state a claim under
the Federal securities laws.
First, Plaintiffs assert claims for market manipulation under Sections 9(a) and
10(b) of the Securities Exchange Act (the “Exchange Act”). They allege that Robinhood put in
place its purchasing limits with the knowledge that doing so would drive down the market prices
of the Affected Stocks. As a threshold matter, market manipulation claims under either section
require deception, and there can be no deception where information is publicly disclosed and
available to the market. This alone is fatal to Plaintiffs’ claims, as they concede that Robinhood
disclosed all of its purchasing restrictions promptly and publicly. (See infra Section I.A.1.)
Beyond this fundamental threshold problem, Plaintiffs also fail to plead conduct that violates any
of the provisions of Section 9(a) of the Exchange Act, which consists of six specific subsections,
setting out the various forms of prohibited market manipulation. Plaintiffs do not even identify
which subsection they allege Robinhood violated, and, in any event, Plaintiffs fail to plead the
elements of a claim under any of the six subsections. (See infra Section I.A.2.)
In addition, Plaintiffs fail to plead facts that give rise to a strong inference of
scienter, as required under either Section 9(a) or Section 10(b). Plaintiffs cannot point to any
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direct evidence of scienter or articulate a plausible reason why Robinhood would manipulate the
market to lower the prices of the Affected Stocks. Plaintiffs do not allege that Robinhood owned
or bought any of the Affected Stocks or stood to profit in any way from price declines in the
Affected Stocks. Instead, Plaintiffs offer two potential motives for Robinhood to allegedly
manipulate the prices for the Affected Stocks. Their first theory is that Robinhood sought to
protect a potential future IPO by lowering the prices of the Affected Stocks to meet its deposit
requirements. But the success of Robinhood’s IPO, which would not occur for another six
months, had nothing to do with the prices at which the Affected Stocks traded. Plaintiffs’ second
theory, relying on paraphrased and generalized allegations from the Antitrust Tranche complaint
that the Court has already rejected, is that Robinhood acted to “help” Citadel Securities cover a
hypothetical proprietary trading position by driving down the prices of the Affected Stocks.
What both of these theories lack is a core requirement for a manipulation claim—that Robinhood
acted with the intent to drive down the prices of the Affected Stocks and thereby profit from the
manipulated stock prices. For each of these reasons, Plaintiffs’ market manipulation claims fail.
(See infra Section I.B.)
Second, Plaintiffs allege a violation of Section 10(b) and Rule 10b-5 based on
alleged fraudulent misrepresentations. Specifically, Plaintiffs allege that Robinhood made false
statements about Robinhood’s own business that somehow deceived investors in connection with
their purchase or sale of securities issued by other companies (the Affected Stocks). None of the
Plaintiffs alleges that he or she was an investor in Robinhood (which was not even a public
company at the time). Section 10(b) does not give rise to such an expansive right of action for
misrepresentations. Robinhood is unaware of any case in which a court has permitted a Section
10(b) claim for losses in securities issued by Company B based on Company A’s allegedly false
statements about Company A’s business. Such a theory is particularly illogical here, where none
of the statements alleged by Plaintiffs even refers to any of the Affected Stocks or their issuers.
As a result, Plaintiffs lack statutory standing to bring a Section 10(b) claim and fail to allege
facts that would meet the element that any misrepresentation was made “in connection with” the
purchase or sale of securities. (See infra Section II.A.)
Plaintiffs also fail sufficiently to plead a number of other required elements of a
Section 10(b) misrepresentation claim including: (1) facts sufficient to show that any of
Robinhood’s statements were false or misleading; (2) loss causation, as Plaintiffs do not allege
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that disclosure of the alleged falsity of Robinhood’s statements affected the price of any of the
Affected Stocks; or (3) facts sufficient to establish scienter. (See infra Section II.B.)
Accordingly, for the reasons stated above and explained in greater detail below,
the Complaint must be dismissed.
BACKGROUND
A.
Robinhood’s Trading Platform.
Robinhood is an industry-changing financial services company founded on the
ethos of putting financial power into the hands of everyday people. (Compl. ¶ 31.)
Robinhood’s securities business currently comprises three entities: Robinhood Markets, Inc.
(“Robinhood Markets”), which wholly owns Robinhood Financial LLC (“Robinhood
Financial”), the customer-facing introducing broker, and Robinhood Securities, LLC
(“Robinhood Securities”), the clearing broker. (Id. ¶¶ 23-25.) Robinhood provides intuitive,
easy access to the financial markets by offering zero commission trades and a logical trading
platform available on a computer or mobile device. (Id. ¶ 38.)
A securities transaction is a multi-step process. When a Robinhood customer
places an order to buy or sell a security using their Robinhood account, Robinhood Financial, as
the introducing broker, may first choose whether to accept the order; should it do so, it sends the
order to Robinhood Securities, the clearing broker. (Id. ¶¶ 23-24.) Robinhood Securities then
routes the order for execution to a market maker; following execution, Robinhood Securities
submits the resulting trade to a clearinghouse for clearance and settlement. (Id. ¶¶ 31-32, 114.)
The main clearinghouse for equities traded in the U.S. is the National Securities Clearing
Corporation (“NSCC”), part of a larger clearing organization called the Depository Trust &
Clearing Corporation (“DTCC”). (Id. ¶ 58.) Clearinghouses such as NSCC and DTCC are
regulated by the SEC. See 17 C.F.R. § 240.17Ad-22.
As this multi-step process unfolds, there can be some risk that market participants
will be unable to satisfy their obligations in connection with a trade. (See generally Compl.
¶¶ 57-58.) To mitigate this risk, clearing brokers, such as Robinhood Securities, are required to
post collateral with NSCC to cover the risk until the trade settles. (Id. ¶¶ 58, 60.) These
collateral requirements are often referred to as deposit requirements. (Id. ¶ 58.) To clear and
settle customer transactions, each trading day Robinhood Securities must meet the deposit
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requirements set by NSCC. (Id.)1 Depending on NSCC’s calculation of the day’s deposit
requirements, Robinhood Securities may be able to withdraw money that it left on deposit the
previous day, or it may be required to deposit additional money. (Id.)
In setting the deposit requirements, NSCC considers volatility in the market; if
NSCC perceives certain securities as being particularly risky or volatile, NSCC may assign a
volatility multiplier or special charge that increases the deposit requirements. (Id.) Another
component of the NSCC capital requirements is referred to as an excess capital premium, which
NSCC may apply following a comparison of the member’s core deposit requirement against the
member’s excess net capital. (Id.) NSCC releases the capital premium when the level of risk is
reduced or Robinhood raises additional capital. (Id.) While NSCC calculates its daily deposit
requirements according to set formulas, it also can exercise discretion in setting the
requirements. (See, e.g., id. ¶¶ 12(a), 60, 91.) If Robinhood Securities were unable to meet its
deposit requirements on a given day, NSCC could liquidate Robinhood Securities’ entire
portfolio. (Id. ¶¶ 60, 122.) Under such circumstances, not only would Robinhood customers be
prevented from buying any stocks (not just the Affected Stocks), but all of Robinhood
customers’ positions would be liquidated as well. (Id. ¶ 60.)
B.
The Unprecedented Market Volatility of January 2021.
January 2021 was marked by a series of unprecedented events in the securities
markets that presented significant challenges to Robinhood’s ability to satisfy its initial collateral
deposit requirements to NSCC on January 28. (Id. ¶¶ 40-43, 58-62.) In late January 2021,
trading spiked when retail investors banded together through online forums to drive a massive
short squeeze involving certain stocks they perceived to be the target of short selling by hedge
funds (the “meme stocks”). (Id. ¶¶ 35, 40-47.)

1 NSCC may also require additional deposits during a trading day. See Virtual Hearing –
Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors
Collide, 117th Cong. at 10 (2021) (statement of Vladimir Tenev, Chief Executive Officer,
Robinhood Markets, Inc.), available at https://financialservices.house.gov/uploadedfiles/hhrg-
117-ba00-wstate-tenevv-20210218.pdf (“Tenev Testimony”). The Court may take judicial
notice of NSCC’s requirements for brokers like Robinhood Securities, which are described in
Mr. Tenev’s testimony. See D.A.M. v. Barr, 474 F. Supp. 3d 45, 55 n.12 (D.D.C. 2020) (taking
judicial notice of Congressional testimony because Congressional testimony “is not subject to
reasonable dispute”) (quoting Fed. R. Evid. 201(b)(2)).
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Retail investors’ activity resulted in extreme market volatility, with dramatic
increases in stock prices. (Id. ¶¶ 40-43.) For example, on January 27, GameStop’s (GME) price
closed at $347.51 per share, a 707.6% increase from just five trading days earlier.2 (Id. ¶¶ 41,
76.) This surging price movement was observed despite GME’s report just a month earlier that
its gross profit dropped from $1,311.4 million in 2019 to $810.9 million in 2020.3

2 See Market Activity, Nasdaq, https://www.nasdaq.com/market-activity (last visited
Dec. 24, 2021). The Court may take judicial notice of this stock information. See La Grasta v.
First Union Sec., Inc., 358 F.3d 840, 842 (11th Cir. 2004) (taking judicial notice of stock
information at the motion to dismiss stage).
3 See GameStop Corp., Annual Report (Form 10-Q) (Dec. 8, 2020) at 2. The Court may
take judicial notice of this SEC filing. See Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1278
(11th Cir. 1999) (“[A] court, when considering a motion to dismiss in a securities fraud case,
may take judicial notice (for the purpose of determining what statements the documents contain
and not to prove the truth of the documents’ contents) of relevant public documents required to
be filed with the SEC, and actually filed.”).
$39.36
$39.12
$43.03
$65.01
$76.79
$147.98
$347.51
$20
$60
$100
$140
$180
$220
$260
$300
$340
$380
1/19/2021
1/20/2021
1/21/2021
1/22/2021
1/25/2021
1/26/2021
1/27/2021
Close Price ($)
GME: Daily Low/High Price and Closing Price
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Indeed, in the span of just five trading days (from January 21 to January 27,
2021), the total daily trading volume for the Affected Stocks4 increased from 230 million to
3.3 billion shares.5

While these unprecedented events were taking place, Robinhood Securities was
managing the risk that the increasing trading volatility in certain securities could affect its
deposit requirements and risk exposure. (Id. ¶¶ 13(a), 42.) As volatility involving the meme
stocks increased, so too did Robinhood Securities’ daily deposit requirements with NSCC. On
the days leading up to January 28, Robinhood Securities’ daily deposit requirements steadily
increased, reaching a total of $690 million on the evening of January 27, 2021.6

4 Plaintiffs refer to the following nine stocks as the “Affected Stocks”: AMC Entertainment
Holdings, Inc. (AMC), Bed Bath & Beyond, Inc. (BBBY), BlackBerry Ltd. (BB), Express, Inc.
(EXPR), GameStop Corporation (GME), Koss Corporation (KOSS), Nokia Oyj (NOK), Tootsie
Roll Industries, Inc. (TR) and Trivago NV (TRVG). (Compl. ¶ 1.)
5 See Market Activity, Nasdaq, https://www.nasdaq.com/market-activity (last visited
Aug. 24, 2021). The Court may take judicial notice of stock information. See supra note 2.
6 See Tenev Testimony at 9-10. The Court may take judicial notice of the approximate
deposit requirements described in Mr. Tenev’s testimony in the days leading up to January 28,
2021. See D.A.M., 474 F. Supp. 3d at 55 n.12. Indeed, Plaintiffs themselves cite Mr. Tenev’s

386M
394M
230M
732M
1,680M
1,432M
3,317M
0M
500M
1,000M
1,500M
2,000M
2,500M
3,000M
3,500M
1/19/2021
1/20/2021
1/21/2021
1/22/2021
1/25/2021
1/26/2021
1/27/2021
Total Daily Trading Volume (Shares)
GME
AMC
BBBY
BB
EXPR
KOSS
NOK
TR
TRVG
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Accordingly, in the days leading up to January 28, Robinhood Securities
increased both initial and maintenance margin requirements to 100% for volatile securities such
as GME, which meant that customers needed sufficient funds to pay for such shares in full,
rather than being able to buy shares with credit, and needed to maintain sufficient funds in their
accounts to cover the value of those securities, rather than using such shares as collateral to buy
other securities on credit. (See id. ¶ 47.) This requirement protected Robinhood (and the rest of
its customers) from the risk that customers might default on their ability to pay for these volatile
securities. (Id. ¶ 42.) As Mr. Tenev explained during a January 27 interview, it is common in
the brokerage industry to have “processes that respond to increases in volatility in certain names
by doing things like raising the margin requirements,” which Robinhood had done “in lots of
cases.” (Id. ¶¶ 45-46.) In other steps taken to reduce volatility-based risks, Robinhood
Securities also limited the number of options contracts for certain stocks that customers could
purchase on Robinhood’s platform, and later required customers seeking to exercise their options
to purchase GME to have sufficient capital in their Robinhood accounts to exercise the option.
(Id. ¶¶ 52-53.)
C.
The Events of January 28, 2021 and Onward.
At approximately 5:11 AM EST on January 28, Robinhood Securities received an
email notice from NSCC stating that its deposit requirements had jumped dramatically to over
$3 billion, nearly 5 times the deposit requirement from the preceding day. (Id. ¶ 58.) As a result,
Robinhood Securities decided, after several hours of deliberations, to temporarily set a small
number of the meme stocks to “position closing only” (“PCO”), which would enable (but not
require) Robinhood customers to sell some or all of their positions in those symbols if they
wished, but restricted new purchases of those volatile securities. (Id. ¶ 59.) Specifically,
Robinhood Securities moved 13 stocks to PCO: “$AAL, $AMC, $BB, $BBY, $CTRM, $EXPR,
$GME, $KOSS, $NAKD, $NOK, $SNDL, $TR, and $TRVG.” (Id. ¶ 63.) Robinhood
announced the PCO decision to its customers in a blog post that explained that the restrictions
were being implemented in light of the recent volatility. (Id.)

testimony to support their allegations regarding Robinhood’s capital requirements. (See Compl.
¶ 59 n.36.)
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The purchase restrictions were a necessary, but difficult, step that Robinhood took
to protect the company, its customers and the markets. Shortly after Robinhood Securities put in
place the majority of the restrictions, NSCC reduced Robinhood Securities’ deposit requirements
to approximately $1.4 billion. (Id. ¶¶ 59-60.) The revised requirements remained hundreds of
millions of dollars above typical levels, but Robinhood Securities promptly complied with and
paid its NSCC deposit requirements that morning so that it could continue serving its customer
base. (Id. ¶ 60.) As Mr. Tenev explained that day, “[Robinhood Securities] did this proactively”
and Robinhood was taking steps “to allow buying and to remove these restrictions in the
morning.” (Id. ¶ 79.)
Robinhood Securities was far from the only clearing broker to impose restrictions
on the meme stocks during this period of unprecedented volatility. (See Tenev Testimony at 8.)
Apex Clearing Corporation, for example, imposed restrictions on several meme stocks, which
allegedly impacted the downstream customers of Apex’s eight introducing broker partners.
(Compl. ¶ 93.) E*TRADE also limited purchases of GME and AMC on January 28, 2021. (Id.)7
Indeed, on January 29, Mr. Tenev discussed the restrictions investors were observing on Yahoo
Finance Live, explaining that, “what [Robinhood has] done is something that other brokerages
have done. It’s not unique to Robinhood to place restrictions on purchasing certain things at
certain times.” (Id. ¶ 92.)
Robinhood worked quickly to remove the restrictions, reducing them to caps on
additional purchases by market open on Friday, January 29, 2021, and lifting all purchase limits
by February 5, 2021. (Id. ¶ 124.) During this period, Robinhood regularly updated its customers
through its website, listing all of the trading restrictions then in effect because of ongoing market
volatility. (Id. ¶¶ 84-87.)8,9

7 Like Robinhood, other brokers, such as Charles Schwab and TD Ameritrade, also raised
margin requirements for GME and other stocks prior to January 28, 2021. (See Robinhood
Tranche Amended Consolidated Class Action Complaint, ECF No. 409 ¶ 253 (citation omitted).)
8 Robinhood notified its customers of temporary purchasing limitations that were applied on
up to 51 stocks at different points between January 28 and February 4, 2021. The Complaint
alleges purchasing limitations on 50 stocks. (Id. ¶ 87.)
9 While continuously managing the PCO and purchase limit restrictions in response to
rapidly changing market conditions, the company spoke with investors and lenders to raise new

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While the purchase restrictions and limits imposed by Robinhood were in place,
the prices of the impacted stocks were volatile and moved in different directions. For example,
while the price of GameStop (GME) shares declined from $354.83 on January 27 to $54.04 on
February 5, and then remained around $50 for several weeks, Castor Maritime (CTRM)
increased from $3.51 on January 27 to $6.62 on February 5, and then increased above the $10
mark for most of the remainder of February.10
D.
The “Short Squeeze” Litigation.
In the instant Complaint, Plaintiffs assert two securities fraud claims based on
Robinhood’s late-January and early-February 2021 purchasing limitations. Plaintiffs bring suit
on behalf of a putative class of all U.S. investors (not just Robinhood customers) who sold shares
in at least one of the volatile Affected Stocks—AMC, BBBY, BB, EXPR, GME, KOSS, NOK,
TR and TRVG—during the six trading days from January 28 to February 4, 2021.
Plaintiffs base their claims on a cherry-picked group of stocks that fit their loss
theory and ignore the many other stocks that do not. Although Plaintiffs’ claim that Robinhood’s
PCO and subsequent customer purchasing limits “manipulated” the market for the nine Affected
Stocks, those 9 are only a subset of the 13 stocks that Robinhood Securities set to PCO on
January 28, 2021, and an even smaller subset of the 51 stocks on which Plaintiffs allege
Robinhood Securities set purchasing limits at different points on January 29 through February 4,
2021. (Id. ¶¶ 1, 4, 86-87.) Plaintiffs offer no explanation for why Robinhood’s PCOs of only 9
so-called Affected Stocks allegedly constitute market manipulation, but the PCOs of the other
4 stocks that Robinhood also PCOed on January 28 and the purchase limits Robinhood placed on
42 other stocks between January 29 and February 4, 2021 do not. Presumably the reason is that
the other stocks did not decline in price during the Class Period—casting doubt on a fundamental

capital and expand its lines of credit to accommodate customer trading volume in light of the
historic market volatility and the unprecedented deposit requirements; by February 1, 2021,
several days after Robinhood first imposed the restrictions, Robinhood had raised $3.4 billion
from investors. (Compl. ¶¶ 9, 87, 107.)
10 See Market Activity, Nasdaq, https://www.nasdaq.com/market-activity (last visited Dec.
10, 2021).
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premise of Plaintiffs’ “market manipulation” theory, i.e., that Robinhood’s PCO caused the price
decline in the nine Affected Stocks.
For many of the stocks at issue, Plaintiffs could have sold their shares at a profit
during the alleged Class Period. Indeed, the lead plaintiff in this action did just that. The Court
appointed Blue Laine-Beveridge to serve as lead plaintiff pursuant to the Private Securities
Litigation Reform Act of 1995, 15 U.S.C. § 78u-4. (ECF No. 420.) Remarkably, Mr. Laine-
Beveridge appears not to be a member of the proposed class defined in the Complaint. (See
Compl. ¶ 1.) Mr. Laine-Beveridge alleges that he held two of the Affected Stocks, AMC and
NOK. According to the trading certification he filed (ECF No. 366-3), he (1) sold his AMC
stock at a profit and (2) did not sell any NOK stock during the Class Period. The Complaint also
identifies Abraham Huacuja, Ava Bernard,11 Brandon Martin, Brendan Clarke, Brian Harbison,
Cecilia Rivas, Garland Ragland Jr., Joseph Gurney, Santiago Bohórquez and Trevor Tarvis as
named plaintiffs. According to certifications they filed, these named plaintiffs sold only five of
the nine Affected Stocks (AMC, BB, GME, NOK and EXPR). (ECF No. 446-1.) None of the
named Plaintiffs alleges holdings or sales of the four remaining Affected Stocks (BBBY, KOSS,
TR and TRVG).
LEGAL STANDARD
“To survive a motion to dismiss [under Rule 12(b)(6)], a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)) (alterations added). Because all of Plaintiffs’ claims under Section 9(a),
Section 10(b) and Rule 10b-5 of the Securities Exchange Act sound in fraud, Plaintiffs must
further meet the heightened pleading requirements of Rule 9(b) of the Federal Rules of Civil
Procedure. Moreover, the Private Securities Litigation Reform Act (“PSLRA”) imposes on
plaintiffs particular pleading requirements in securities fraud claims. 15 U.S.C. § 78u-4(b).
The heightened pleading requirements apply to both the conduct and scienter
elements of Plaintiffs’ claims. First, with respect to the challenged conduct, to state a claim for
market manipulation—whether under Section 9(a) or under Section 10(b) and Rule 10b-5—

11 Ms. Bernard was purportedly assigned her claims by one Colleen Cooke. (See Compl.
Ex. A (ECF No. 446-1), at 6.)
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Plaintiffs must plead with particularity “the nature, purpose, and effect of the fraudulent conduct
and the roles of the defendants.” ATSI Communications, Inc. v. Shaar Fund, Ltd., 493 F.3d 87,
102 (2d Cir. 2007); see also Sterne, Agee & Leach, Inc. v. Nat’l Sec. Clearing Corp., No. CV-07-
BE-909-S, 2008 WL 11424178, at *11-13 (N.D. Ala. Sept. 30, 2008) (applying heightened
pleading standard to Section 10(b) market manipulation claim); Fezzani v. Bear, Stearns & Co.,
384 F. Supp. 2d 618, 642-43 (S.D.N.Y. 2004) (applying heightened pleading standard to
Section 9(a) claims). To state a claim for misrepresentation under Section 10(b) and Rule 10b-5,
Plaintiffs must plead, with particularity “(1) which statements or omissions were made in which
documents or oral representations; (2) when, where, and by whom the statements were made (or,
in the case of omissions, not made); (3) the content of the statements or omissions and how they
were misleading; and (4) what the defendant received as a result of the fraud.” Carvelli v.
Ocwen Fin. Corp., 934 F.3d 1307, 1318 (11th Cir. 2019) (quoting FindWhat Investor Grp. v.
FindWhat.com, 658 F.3d 1282, 1296 (11th Cir. 2011)); see also 15 U.S.C. § 78u-4(b)(1).
Second, with respect to scienter, for both market manipulation and
misrepresentation claims, Plaintiffs must “state with particularity facts giving rise to a strong
inference that the defendant acted with the required state of mind.” 15 U.S.C. § 78u-4(b)(2)(A).
To state a claim for a violation under Section 9(a), 10(b) or Rule 10b-5, Plaintiffs must allege
that Robinhood acted with scienter.12 Tellabs, Inc. v. Makor Issues & Rts., Ltd., 551 U.S. 308,
323-24 (2007) (addressing claims brought under Section 10(b)); ATSI, 493 F.3d at 102 (2d Cir.
2007) (addressing market manipulation claims brought under Section 10(b)); Cohen v.
Stevanovich, 722 F. Supp. 2d 416, 428 (S.D.N.Y. 2010) (addressing market manipulation claims
brought under Section 9(a)). Because a strong inference of scienter must be “cogent and at least
as compelling as any opposing inference one could draw from the facts alleged,” claims are
insufficiently pleaded if an alternative motive is more compelling than an inference of scienter.
Tellabs, 551 U.S. at 324. Courts must consider plausible alternative motives before finding a
strong inference of scienter. See id. at 324 (“To determine whether the plaintiff has alleged facts
that give rise to the requisite ‘strong inference’ of scienter, a court must consider plausible,

12 Plaintiffs bringing private causes of action for alleged violations of Section 9(a) must,
pursuant to Section 9(f), plead with particularity that the defendant acted with a “willful[]” state
of mind. See 15 U.S.C. § 78i(f). Courts often refer to this as a scienter requirement. See, e.g.,
Connolly v. Havens, 763 F. Supp. 6, 11 (S.D.N.Y. 1991).
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nonculpable explanations for the defendant’s conduct.”); FindWhat, 658 F.3d at 1300 (holding
the scienter inquiry is “inherently comparative” because courts “must take into account plausible
opposing inferences”). In short, to survive a motion to dismiss, Plaintiffs must plead facts
strongly indicating that Robinhood intended to “deceive, manipulate or defraud.” Bryant v.
Avado Brands, Inc., 187 F.3d 1271, 1282 (11th Cir. 1999) (quoting Ernst & Ernst v.
Hochfelder, 425 U.S. 185, 194 n.12 (1976)); see also Mizzaro v. Home Depot, Inc., 544 F.3d
1230, 1238 (11th Cir. 2008) (“Putting the PSLRA and our substantive scienter case law together
yields the following stringent standard: to survive a motion to dismiss in this case, [plaintiff]
must (in addition to pleading all of the other elements of a § 10(b) claim) plead ‘with
particularity facts giving rise to a strong inference’ [of scienter].”).
ARGUMENT
Plaintiffs’ attempt to convert the unprecedented events of January 28 into a
federal securities claim fails because the securities laws do not prohibit the conduct that Plaintiffs
allege in their claims. First, Plaintiffs’ allegation that Robinhood engaged in market
manipulation in violation of both Sections 9(a) and 10(b) fails because there was no alleged
deception. Plaintiffs’ entire theory collapses upon itself given the absence of any plausible
reason why Robinhood would want the prices of the Affected Stocks to decrease. (See infra
Section I.) Second, Plaintiffs’ misrepresentation claim cannot overcome the fundamental
problem that the alleged misrepresentations concerned Robinhood’s business (in which Plaintiffs
were not investors), not the businesses of the Affected Stocks that Plaintiffs held. (See infra
Section II.) All of Plaintiffs’ claims must be dismissed.
I.
PLAINTIFFS DO NOT PLEAD MARKET MANIPULATION UNDER EITHER
SECTION 9(a) OR SECTION 10(b) OF THE SECURITIES EXCHANGE ACT.
Plaintiffs first assert that Robinhood’s purchasing restrictions constitute market
manipulation in violation of both Sections 9(a) and 10(b) of the Securities Exchange Act.
Plaintiffs fail to plead the requisite elements.
As a threshold matter, a market manipulation claim under either Section requires
pleading that a defendant engaged in “intentional or willful conduct designed to deceive or
defraud investors.” In re Galectin Therapeutics, Inc. Sec. Litig., 843 F.3d 1257, 1273 (11th Cir.
2016) (quoting Ernst & Ernst v. Hochfelder, 425 U.S. 185, 199 (1976)).
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Section 9(f) provides the private right of action for a violation of Section 9(a). To
sustain their Section 9(a) claim, Plaintiffs must also adequately plead that Robinhood engaged in
at least one of six proscribed forms of manipulative conduct, see 15 U.S.C. § 78i(a)(1)–(6); that
Robinhood did so “willfully,” see 15 U.S.C. § 78i(f); and that Plaintiffs bought or sold a security
“at a price which was affected” by Robinhood’s alleged violation of Section 9(a), see id.; see
also I.B. Trading, Inc. v. Tripoint Glob. Equities, LLC, 280 F. Supp. 3d 524, 540 (S.D.N.Y.
2017).
To sustain their Section 10(b) claim, Plaintiffs must allege that Robinhood, “in
connection with the purchase or sale of any security . . . [engaged in] any manipulative or
deceptive device or contrivance in contravention of such rules and regulations as the
Commission may prescribe.” 15 U.S.C. § 78j(b). Under Rules 10b-5(a) and (c), which specify
the conduct constituting market manipulation under Section 10(b), a defendant may not employ a
device, scheme, or artifice to defraud, or engage in any act, practice, or course of business that
operates as a fraud or deceit upon any person.13 17 C.F.R. § 240.10b-5. Therefore, to prevail on
a Section 10(b) market manipulation claim, Plaintiffs must plead, with particularity,
“(1) manipulative acts; (2) damage (3) caused by reliance on an assumption of an efficient
market free of manipulation; (4) scienter; (5) in connection with the purchase or sale of
securities; (6) furthered by the defendant’s use of the mails or any facility of a national securities
exchange.” ATSI, 493 F.3d at 101.
Plaintiffs cannot prevail on a market manipulation claim under either Section 9(a)
or Section 10(b), and these claims must be dismissed, for two reasons. Under either Section of
the Exchange Act, Plaintiffs fail to plead (1) manipulative conduct or (2) the requisite state of
mind to state a claim.
A.
Plaintiffs Do Not Adequately Plead Manipulative Conduct.
Plaintiffs’ market manipulation claim is deficient because Plaintiffs fail to plead
the requisite manipulative conduct. First, Plaintiffs fail to allege that Robinhood deceived
investors about the purchase restrictions. Second, Plaintiffs fail to allege the elements of any of

13 Rule 10b-5(b), which addresses misrepresentations and omissions, prohibits making any
untrue statements or omissions of material fact, 17 C.F.R. § 240.10b-5, and is addressed in
Section II below.
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the subsections of Section 9(a) defining manipulative conduct. Plaintiffs’ claims therefore
should be dismissed.
1.
Plaintiffs Do Not Allege that Robinhood Deceived Investors About Its
Purchase Restrictions.
Market manipulation claims are fundamentally concerned with the integrity of the
market for the securities at issue. Therefore, the viability of a claim depends on whether the
defendant allegedly profits from the fact that investors are trading in a market unaware of
conduct that undermines the integrity of trading in the securities at issue. See Gurary v.
Winehouse, 190 F.3d 37, 45 (2d Cir. 1999) (“[A] private plaintiff . . . must establish that he or
she engaged in a securities trade in ignorance of the fact that the price was affected by the
alleged manipulation.”). “In order for market activity to be manipulative, that conduct must
involve misrepresentation or nondisclosure.” Wilson v. Merrill Lynch & Co., 671 F.3d 120, 130
(2d Cir. 2011). The “critical question” in determining whether manipulation has occurred is
whether the conduct at issue “‘artificially’ affects a security’s price in a deceptive manner.”
ATSI, 493 F.3d at 100 (emphasis added, internal citation omitted). As a result, when evaluating a
market manipulation claim, courts consider whether the alleged “manipulator ‘inject[ed]
inaccurate information into the marketplace or creat[ed] a false impression of supply and
demand . . . for the purpose of artificially depressing or inflating the price of the security.’”
ATSI, 493 F.3d at 101 (quoting GFL Advantage Fund, Ltd. v. Colkitt, 272 F.3d 189, 207 (3d Cir.
2001)). “[N]ondisclosure is usually essential to the success of a manipulative scheme.” Santa
Fe Indus., Inc. v. Green, 430 U.S. 462, 477 (1977).
Reported cases on market manipulation illustrate these requirements. A
paradigmatic example of manipulative conduct is a pump-and-dump scheme in which a
defendant inflates the price of stock that the defendant owns through false and misleading
statements to other investors in order to drive up the price of that stock, so the defendant can sell
the stock at an artificially inflated price. See, e.g., SEC v. Resch-Cassin & Co., 362 F. Supp.
964, 978 (S.D.N.Y. 1973); SEC v. Malenfant, 784 F. Supp. 141, 142 (S.D.N.Y. 1992).
Manipulative conduct is also often found where the defendant engages in some kind of fictional
transaction “such as wash sales, matched orders, or rigged prices, that are intended to mislead
investors by artificially affecting market activity.” ATSI, 493 F.3d at 100. Another example of
manipulative conduct is where the defendant engages in covert, large-scale purchasing to drive
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up the price of a security and dissuade shareholders from accepting a rival’s tender offer. See
Crane Co. v. Westinghouse Air Brake Co., 419 F.2d 787, 795 (2d Cir. 1969). The common
factor underlying a market manipulation claim is that the defendant engages in deceptive conduct
with the express purpose of affecting a stock’s price without the plaintiff’s knowledge in order to
profit from the manipulated price of that stock.
There are no such allegations of market manipulation here. Plaintiffs contend that
Robinhood “affected and distorted the normal market dynamics” for the Affected Stocks by:
(a) raising initial and maintenance margin requirements for GME and other stocks; (b) notifying
customers about closing out customers’ options positions in AMC and GME where customers
failed to maintain collateral sufficient to execute in-the-money positions on the strike date;
(c) implementing the PCO restrictions prior to market open on January 28; and (d) limiting
customer purchases for the Affected Stocks following January 28. (Id. ¶¶ 52, 59, 62, 63, 84-87,
107, 112, 117, 121, 137.) However, Plaintiffs do not allege—nor could they allege—that
Robinhood withheld or concealed any of this supposed “manipulative” conduct from the market.
To the contrary, Robinhood informed its customers of each of the actions it was taking and,
indeed, a number of them were widely reported. For example, customers were notified of
margin requirement increases in order for those customers to provide sufficient assets to cover
their positions.14 As another example, and as shown in the Complaint, Robinhood emailed
customers on the evening of January 27 regarding closing out options positions. (Id. ¶¶ 52-53.)
Finally, the purchasing restrictions and the scope and duration of the restrictions were disclosed
on Robinhood’s public website for all to see until such time as they were lifted in their entirety.
(Id. ¶¶ 84-88, 124.) Because the challenged conduct was fully disclosed, there can be no
manipulation. See Kraft v. Third Coast Midstream, No. 19-CV-9398 (LJL), 2021 WL 860987,
at *23 (S.D.N.Y. Mar. 8, 2021) (dismissing market manipulation claim where the underlying
conduct was “fully disclosed”); Brady v. Top Ships Inc., No. 17-cv-4987 (BMC),
2019 WL 3553999, at *8 (E.D.N.Y. Aug. 5, 2019) (dismissing market manipulation claim
predicated on a series of reverse stock splits because the transactions were “fully disclosed to the

14 Indeed, the increases in margin requirements were also reported by the press. See Matt Egan,
Robinhood Ramps Up Margin Requirements on Zooming GameStop, AMC, CNN Business (Jan.
27, 2021, 1:53 PM), available at https://www.cnn.com/business/live-news/stock-market-news-
012721/h_f037344e14a037160cc724607ff72da0#:~:text=Robinhood%2C%20the%20free%20tra
ding%20app,initial%20margin%20requirement%20and%20maintenance.
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market”), aff’d sub nom. Onel v. Top Ships, Inc., 806 F. App’x 64 (2d Cir. 2020); In re Merrill
Lynch Auction Rate Sec. Litig., 704 F. Supp. 2d 378, 390 (S.D.N.Y. 2010) (dismissing market
manipulation claim because “[t]he market is not misled when a transaction’s terms are fully
disclosed”), aff’d sub nom. Wilson v. Merrill Lynch & Co., Inc., 671 F.3d 120 (2d Cir. 2011).
None of Plaintiffs’ other allegations cures this fundamental flaw. For example,
Plaintiffs’ conclusory allegations that the restrictions “affected and distorted the normal market
dynamics” (Compl. ¶ 137) do not render the conduct manipulative. Just two days after
Robinhood imposed the purchasing limitations, the SEC reiterated in an investor alert and
bulletin that brokers have the authority to restrict trading during periods of volatility and that
brokers may reserve that right in their customer agreements.15 That conduct is exactly what
Robinhood Securities did here. In other words, the bulletin noted that brokers may engage in the
very activity that may cause the “distort[ion”] Plaintiffs contend is unlawful. Additionally, the
mere allegation that the purchasing limitations affected the price of the Affected Stocks—which
Robinhood denies—also does not render the conduct manipulative. Courts have resoundingly
rejected broad arguments that any conduct allegedly affecting the trading prices of a security
constitutes market manipulation. See Cohen, 722 F. Supp. 2d at 426 (dismissing market
manipulation claims under Sections 9(a) and 10(b) where “[a]side from bald conclusions, there
[were] no allegations . . . that the [trading] alleged here was manipulative in any respect, even
assuming that the effect of such trading was to depress the price of SulphCo stock”); Trane Co.
v. O’Connor Sec., 561 F. Supp. 301, 305 (S.D.N.Y. 1983) (finding no manipulative conduct
where defendant’s trading affected the price of a particular stock because “[i]f what defendants
did constituted manipulation within the meaning of Section 9(a), most large scale transactions in
a single security would be prohibited [and] [t]hat was clearly not the purpose of Congress”).
Plaintiffs’ conclusory allegation that Robinhood “misrepresented material facts to
give the false impression to Class members that the markets for the Affected Stocks were free of

15 See Securities and Exchange Comm’n, “Thinking About Investing in the Latest Hot
Stock?” (Jan. 30, 2021) (“Jan. 30 SEC Statement”), https://www.sec.gov/oiea/investor-alerts-
and-bulletins/risks-short-term-trading-based-social-media-investor-alert. The Court may take
judicial notice of the Jan. 30 SEC Statement because it is a public record, the accuracy of which
cannot reasonably be questioned. See Univ. Express, Inc. v. SEC, 177 F. App’x 52, 53 (11th Cir.
2006) (taking judicial notice of public records at the motion to dismiss stage).
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manipulation” (Compl. ¶ 139) similarly misses the mark. To the extent Plaintiffs claim that
Robinhood “manipulated” the market by failing to disclose to investors that its trading
restrictions were a “manipulation,” their logic is circular and inadequate. For example, in Brady,
the plaintiffs advanced a similar argument that fully disclosed transactions were manipulative
because the defendants did not disclose the transactions were part of a “manipulative scheme.”
2019 WL 3553999, at *7-8. The court rejected that reasoning, explaining that it was “a classic
example of circular reasoning and conclusory pleading” because, as is the case here, the
plaintiffs did nothing more than allege that the “defendants’ conduct was manipulative because
they did not tell [investors] that their conduct was manipulative.” See id.
To the extent that Plaintiffs contend that Robinhood misled investors about the
value of the Affected Stocks, as discussed in Section II.A, such claims fail because all the
alleged misstatements identified by Plaintiffs concern Robinhood’s business, not the Affected
Stocks. Nowhere do Plaintiffs allege any misrepresentations or deception by Robinhood
concerning any of the Affected Stocks. Setting aside the fact that the alleged misrepresentations
identified by Plaintiffs were not false or misleading (as explained in Section II.B.1), Plaintiffs do
not state a claim for market manipulation because they fail to identify any representation by
Robinhood (and there was none) that “inject[ed] inaccurate information into the marketplace”
about the value of the Affected Stocks. See ATSI, 493 F.3d at 100-01 (explaining that a key
indicator of market manipulation is whether the conduct “sends a false pricing signal to the
market” about the relevant securities). Nor could they; not one of the alleged misstatements
about Robinhood’s business changes the fact that the various purchasing limitations that
Plaintiffs complain disrupted the functioning of the marketplace were fully disclosed and widely
reported to the public.
In sum, comparing the Complaint’s core allegations to the conduct that courts
have found manipulative in the seminal market manipulation cases only underscores that
Robinhood’s conduct was not “market manipulation.” In cases such as Crane, Resch-Cassin and
Malenfant described above, the defendants’ conduct was manipulative because they engaged in
conduct that conveyed to investors a false or misleading impression about the value of particular
securities and then defendants profited from investors’ transactions in those securities at the
manipulated price. None of that resembles what Plaintiffs allege in the Complaint. Plaintiffs do
not allege that Robinhood engaged in any covert conduct or made any misstatements about any
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of the Affected Stocks. They also do not allege that Robinhood owned or bought any of the
Affected Securities or profited in any way from any decreases in the prices of those securities.
These fundamental defects preclude any finding that Robinhood engaged in manipulative
conduct under either Section 9(a) or Section 10(b) and Rule 10b-5.
2.
Plaintiffs Do Not Allege a Violation of Any of the Six Subsections of
Section 9(a).
As noted above, a plaintiff asserting a claim for market manipulation under
Section 9(a) must plead facts sufficient to sustain a violation of at least one of Sections 9(a)(1)
through 9(a)(6). Remarkably, Plaintiffs never identify which subsection they contend
Robinhood violated. (See Compl. ¶¶ 136-141.) No doubt that is because, as explained below,
Plaintiffs cannot state a claim under any of Section 9(a)’s subsections.
i.
Plaintiffs Do Not Plead a Claim Under Subsection 9(a)(1).
To state a claim under Section 9(a)(1), a plaintiff must allege that the defendant
(1) engaged in wash sales or matched orders;16 (2) “for the purpose of creating a false or
misleading appearance of active trading in any security . . . or a false or misleading appearance
with respect to the market for any such security.” See 15 U.S.C. § 78i(a)(1); Ernst & Ernst, 425
U.S. at 205 n.25. Plaintiffs fail to allege either element.
First, Plaintiffs do not allege that Robinhood engaged in either wash sales or
matched orders. (See Compl. ¶¶ 136-141.) This alone precludes a claim under Subsection
9(a)(1). See Cohen, 722 F. Supp. 2d at 424 (dismissing Subsection 9(a)(1) claim where Plaintiffs
did not identify any wash sales or matched orders). Second, Plaintiffs fail to allege that

16 Specifically, the statute proscribes the following conduct: “(A) to effect any transaction in
such security which involves no change in the beneficial ownership thereof, or (B) to enter an
order or orders for the purchase of such security with the knowledge that an order or orders of
substantially the same size, at substantially the same time, and at substantially the same price, for
the sale of any such security, has been or will be entered by or for the same or different parties,
or (C) to enter any order or orders for the sale of any such security with the knowledge that an
order or orders of substantially the same size, at substantially the same time, and at substantially
the same price, for the purchase of such security, has been or will be entered by or for the same
or different parties.” 15 U.S.C. § 78i(a)(1). Courts refer to the conduct described in (A) as wash
sales and refer to the conduct described in (B) and (C) as matched orders. See Ernst & Ernst,
425 U.S. at 205 n.25.
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Robinhood imposed the limited trading restrictions “for the purpose of creating a false or
misleading appearance of active trading in any security . . . or a false or misleading appearance
with respect to the market for any such security.” See 15 U.S.C. § 78i(a)(1). To the contrary,
Plaintiffs allege that Robinhood publicly announced that it was restricting trading.
ii.
Plaintiffs Do Not Plead a Claim Under Subsection 9(a)(2).
Subsection 9(a)(2) requires establishing that the defendant engaged in (1) “a
series of transactions . . . creating actual or apparent active trading in [a] security, or raising or
depressing the price” of the security, (2) for “the purpose of inducing the purchase or sale of such
security by others.” 15 U.S.C. § 78i(a)(2). Again, Plaintiffs do not allege either element.
First, Plaintiffs do not allege that Robinhood engaged in “a series of
transactions.” A defendant engages in “a series of transactions” where the defendant participates
in purchasing, selling, bidding, or ordering purchases or sales of securities. See SEC v. Lek Sec.
Corp., 276 F. Supp. 3d 49, 62 (S.D.N.Y. 2017). Here, Plaintiffs do not allege that Robinhood
was purchasing, selling, bidding or ordering purchases or sales of any securities for itself. This
is fatal to any claim under Subsection 9(a)(2). See Baum v. Phillips, Appel & Walden, Inc., 648
F. Supp. 1518, 1530 (S.D.N.Y. 1986) (dismissing a Subsection 9(a)(2) claim against brokerage
where plaintiffs’ manipulation claim was based on trades the brokerage did not execute rather
than on “a series of transactions”), aff’d sub nom. Asch v. Philips, Appel & Walden, Inc., 867
F.2d 776 (2d Cir. 1989).
Second, Plaintiffs fail to allege that Robinhood imposed the purchasing
restrictions “for the purpose of inducing the purchase or sale of such security by others.” 15
U.S.C. § 78i(a)(2). Plaintiffs allege that Robinhood’s purpose for implementing the restrictions
was to reduce its deposit requirements to avoid liquidation in the lead-up to its eventual IPO.
(See, e.g., Compl. ¶¶ 11, 12, 15.) Plaintiffs never allege that Robinhood had any interest in
whether its customers sold the Affected Stocks (and certainly cannot allege, given the PCO
restrictions, that Robinhood’s purpose was to induce the stocks’ purchase). The absence of any
allegations that Robinhood had a purpose to induce anyone to purchase or sell securities is fatal
to Plaintiffs’ claim. See, e.g., Spencer Cos. v. Agency Rent-A-Car, Inc., No. 81-2097-S, 1981
WL 1680, at *4 (D. Mass. Sept. 21, 1981) (“Since plaintiff has failed to allege that defendants’
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purpose was to induce anyone to purchase the stock because of the higher market price, no
violation of § 9(a)(2) has been stated.”).
iii.
Plaintiffs Do Not Plead a Claim Under Subsections 9(a)(3) or
9(a)(5).
Subsections 9(a)(3) and 9(a)(5) closely parallel each other: Subsection 9(a)(3)
prohibits (1) a person, including but not limited to a broker, (2) from disseminating information
about whether the price of a security “is likely to rise or fall because of market operations,”
(3) where the purpose of doing so is to “induce the purchase or sale of any security.” 15 U.S.C.
§ 78i(a)(3). Subsection 9(a)(5) prohibits brokers from hiring another person to disseminate such
information “[f]or consideration.” 15 U.S.C. § 78i(a)(5).
Other than pleading that Robinhood is a broker (which Robinhood Securities and
Robinhood Financial are), Plaintiffs do not plead the elements necessary to sustain a claim under
Subsections 9(a)(3) or 9(a)(5). First, Plaintiffs do not allege that Robinhood—or anyone to
whom Robinhood paid consideration—disseminated information about whether the price of the
Affected Stocks was likely to rise or fall. Indeed, none of the statements by Robinhood
identified in Plaintiffs’ Complaint has anything to do with the price of the Affected Stocks.
Second, as explained above in Section I.A.2.ii, Plaintiffs do not allege that Robinhood acted with
any purpose to “induce the purchase or sale of any security.” Plaintiffs therefore fail to state a
claim under either Subsection 9(a)(3) or Subsection 9(a)(5).
iv.
Plaintiffs Do Not Plead a Claim Under Subsection 9(a)(4).
To state a claim under Subsection 9(a)(4), Plaintiffs must plead with particularity
that (1) a person, including but not limited to a broker, (2) made a false or misleading statement
with respect to a material fact (3) that the person knew or had reasonable ground to believe was
false or misleading (4) for the purpose of inducing the purchase or sale of a security. See 15
U.S.C. § 78i(a)(4). Courts have held that Subsection 9(a)(4) “closely parallels” Section 10(b)
and Rule 10b-5, and dismissal of Subsection 9(a)(4) claims is appropriate where a plaintiff fails
to plead any element of a 10b-5 violation that is also necessary for a Subsection 9(a)(4) violation.
See Panfil v. ACC Corp., 768 F. Supp. 54, 59 (W.D.N.Y. 1991) (“Given the parallel
requirements of these statutes, plaintiff’s failure to show the omission of a material fact under
rule 10b–5 . . . also defeats his claim under § 9(a)(4).”), aff’d, 952 F.2d 394 (2d Cir. 1991);
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Y-GAR Cap. LLC v. Credit Suisse Grp. AG, No. 19 Civ. 2827 (AT), 2020 WL 71163, at *9
(S.D.N.Y. Jan. 2, 2020) (“Because Plaintiff has failed to allege misrepresentations and scienter
sufficient to sustain a Section 10(b) claim, the Section 9(a)(4) claim also fails.”).
Here, Plaintiffs allege that Robinhood intentionally “misrepresented material facts
to give the false impression to Class members that the markets for the Affected Stocks were free
of manipulation.” (Compl. ¶ 139.) As explained in the preceding sections, Plaintiffs have not
alleged that Robinhood acted “for the purpose of inducing the purchase or sale” of a security.
They cannot, therefore, make out the final element of a Subsection 9(a)(4) claim, and any such
attempt would fail for this reason alone. In addition, as explained in Section II below, Plaintiffs
have not pleaded any misrepresentations sufficient to sustain a claim for a violation of Section
10(b) and Rule 10b-5, which also preclude them for satisfying the second and third elements of
Subsection 9(a)(4). See Panfil, 768 F. Supp. at 59; Y-GAR Cap. LLC, 2020 WL 71163, at *9.
v.
Plaintiffs Do Not Plead a Claim Under Subsection 9(a)(6).
Subsection 9(a)(6) requires a plaintiff to establish that the defendant (1) engaged
in a “series of transactions,” (2) for the purpose of “pegging, fixing, or stabilizing the price” of a
security “in contravention of such rules and regulations as the Commission may prescribe.” 15
U.S.C. § 78i(a)(6). As explained in Section I.A.2.ii above, Plaintiffs cannot satisfy the first
element because they have not alleged that Robinhood engaged “in a series of transactions.”
Plaintiffs also cannot satisfy the second element for two reasons.
First, Plaintiffs do not identify in the Complaint any SEC rule or regulation
adopted under Subsection 9(a)(6) that they contend Robinhood violated. That is because it
would be impossible for Plaintiffs to do so—the SEC has repealed the rules (Rules 10b-6 to
10b-8) formerly issued under Section 9(a)(6) and replaced them with rules that apply only to
underwriters and other offering participants. See 62 Fed. Reg. 520-01 (Jan. 3, 1997). Because
there are no longer any SEC rules applicable to broker-dealers under Section 9(a)(6), Plaintiffs
cannot state a claim under this subsection.
Second, Plaintiffs do not allege that Robinhood acted with a purpose of “pegging,
fixing, or stabilizing the price“ of any security. (See generally Compl. ¶¶ 136-141.) Market
stabilizing activities are defined as “a process whereby the market price of a security is pegged or
fixed for the limited purpose of preventing or retarding a decline in contemplation of or during a
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public offering of securities.” SEC, Securities Exchange Act Release No. 4163 (Sept. 16, 1948).
Nowhere do Plaintiffs allege that Robinhood engaged in any conduct related to a public offering
of any of the Affected Stocks.
vi.
Plaintiffs’ Section 10(b) Market Manipulation Claim Fails for the
Same Reasons.
Having failed to state a claim under any of the six subsections of Section 9(a),
Plaintiffs’ market manipulation claim under Section 10(b) fails as well. Courts customarily
analyze market manipulation claims under the two sections together, and dismissal of one leads
to dismissal of the other. See, e.g., Brady, 2019 WL 3553999, at *10 n.7 (holding that where
Section 10(b) claim was dismissed for failure to plead “a series of manipulative acts,” Section
9(a) claim should be dismissed for the same reason); Trane, 561 F. Supp. at 306 (“In sum, the
proof is insufficient to support a finding that defendants engaged in market manipulation
forbidden under § 9(a)(2) of the Exchange Act. Since plaintiff relies on its proof of market
manipulation to establish its claimed violation of Section 10(b), that claim must also fail.”).
Thus, because Plaintiffs fail to state a Section 9(a) claim, the accompanying Section 10(b)
market manipulation claim, based on the same conduct, must be dismissed as well.
B.
Plaintiffs Do Not Adequately Plead the Requisite State of Mind.
Plaintiffs also do not state a claim for market manipulation because they do not
plead with particularity that Robinhood had the requisite state of mind (or scienter) under either
Section 9(a) or Section 10(b). This provides an independent basis to dismiss the market
manipulation claims.
Here, Plaintiffs must “plead with particular[ity] facts giving rise to a strong
inference that the defendant intended to deceive investors by artificially affecting the market
price of securities.” ATSI, 493 F.3d at 102. To state a claim under Section 10(b) and Rule
10b-5, Plaintiffs must plead specific facts supporting a strong inference that Robinhood acted
intentionally or with severe recklessness. See FindWhat, 658 F.3d at 1299. Conduct is severely
reckless if it is “highly unreasonable and constituted an extreme departure from the standards of
ordinary care to the extent that the danger was either known to the defendant or so obvious that
the defendant must have been aware of it.” South Cherry Street, LLC v. Hennessee Group LLC,
573 F.3d 98, 109 (2d Cir. 2009). Although severe recklessness suffices under Section 10(b), it
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does not suffice under Section 9(a). To state a claim for a violation of Section 9(a), Plaintiffs
must satisfy an even higher standard by alleging intentional and “willful” conduct. See 15
U.S.C. § 78i(f); Panfil, 768 F. Supp. at 59. A failure to plead scienter under Section 10(b)
necessarily results in a failure to plead the willfulness requirement of Section 9(f).
Manipulative intent is generally only found where a defendant has a direct
pecuniary interest in affecting the trading price of a security and thus engages in manipulative
conduct in order to raise or lower the price of the security in order to profit. For example, in
Resch-Cassin, which involved a pump-and-dump scheme, the court found the defendants had
manipulative intent because the defendants had an “obvious incentive” to drive up the price of
the security so they could sell their holdings at an inflated price. 362 F. Supp. at 977. Similarly,
in Crane, which involved a defendant attempting to defeat a corporate takeover by making a
competitor’s tender offer appear less attractive, the court found manipulative intent because the
defendant had a “substantial, direct pecuniary interest” in raising the price of the company’s
stock. 419 F.2d at 795 (citations omitted).
The circumstances here are nothing like those in Resch-Cassin or Crane.
Plaintiffs do not allege that Robinhood had a direct pecuniary interest in the price of any of the
Affected Stocks (or the other 42 stocks on which it imposed trading limitations). Nowhere do
Plaintiffs allege that Robinhood held positions in those securities or bought them, or that
Robinhood had any other financial interest in depressing their trading prices. Instead,
Robinhood did not “st[and] to gain anything from artificially driving [down] the price” of the
relevant securities, precluding a finding of manipulative intent. See Baum, 648 F. Supp. at 1531;
see also Ray v. Lehman Bros. Kuhn Loeb, 624 F. Supp. 16, 22 (N.D. Ga. 1984) (finding no
manipulative intent where defendant had sold all of his stock in the relevant security “and thus
could not profit from any purchase by [plaintiff] of the stock”).
Plaintiffs offer two alternative theories to attempt to create a plausible inference
of intent by Robinhood to manipulate the prices of the Affected Stocks, but neither theory
succeeds. Plaintiffs hypothesize that Robinhood imposed the PCO restrictions either (1) out of a
desire to survive until the company’s “lucrative IPO” (Compl. ¶¶ 12, 15, 67, 71); or (2) to
somehow assist Citadel LLC and Citadel Securities by driving down the price of the Affected
Stocks to help them cover alleged proprietary short positions in those stocks (id. ¶ 71). Neither
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of these theories of intent is sufficient to state a claim for market manipulation under the
heightened pleading requirements of the PSLRA and Rule 9(b).
First, Plaintiffs’ theory that Robinhood acted to protect its eventual IPO does not
evince manipulative intent. (Id. ¶¶ 137-139.) The success of Robinhood’s eventual IPO had
nothing to do with the purchase or sale of the Affected Stocks, or at what price any of the
Affected Stocks traded, and Plaintiffs have not pleaded any allegations to the contrary.
Therefore, Plaintiffs fail to establish how Robinhood’s desire to have a successful IPO furthers a
strong inference that Robinhood purposefully induced any investor to sell the Affected Stocks at
allegedly manipulated trading prices. Moreover, at its core, Plaintiffs’ scienter theory relating to
Robinhood’s purported desire to protect its IPO boils down to a contention that Robinhood’s
conduct was motivated by a general desire to profit, without a showing of profit from transacting
in the specific Affected Stocks at manipulated prices. But courts have squarely held that a
general motive to profit is not sufficient to establish manipulative intent. See, e.g., Trane, 561 F.
Supp. at 305 (finding no manipulative intent where defendants engaged in the relevant conduct
“in the expectation of a profit”).
Second, Plaintiffs’ alternative theory, that Robinhood manipulated the market to
assist the hedge fund, Citadel LLC, and the market maker, Citadel Securities, is similarly
illogical. (Compl. ¶¶ 70, 71.) As an initial matter, Plaintiffs do not allege any relationship
whatsoever between Robinhood and Citadel LLC. With respect to Citadel Securities, Plaintiffs
allege only that Robinhood and Citadel Securities had a lawful, ongoing business relationship
and that the parties had a business discussion on January 27 regarding “across-the-board
adjustments” to payment for order flow between Robinhood and Citadel Securities. (Id. ¶¶ 49,
50 n.29, 70.) Plaintiffs fail to allege, however, any benefit to Robinhood from “manipulating”
the Affected Stock prices on behalf of Citadel Securities. Indeed, as the Court concluded based
on similar allegations by the Antitrust Tranche Plaintiffs, the “mere fact that Citadel Securities is
an important business partner . . . does not provide sufficient motive to conspire.” (Order
Dismissing the Antitrust Amended Complaint (“Antitrust Tranche Decision”), ECF No. 438,
at 37.) In short, Plaintiffs do nothing more than regurgitate (in a far more abbreviated fashion)
the allegations of collusion between Robinhood and Citadel Securities that this Court already has
concluded are too vague and ambiguous to make a conspiracy plausible. (See id. at 50.)
Consequently, the absence of particularized allegations here precludes any “strong inference”
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that Robinhood acted intentionally to manipulate the share prices of the Affected Stocks to help
either Citadel LLC or Citadel Securities. See Cohen, 722 F. Supp. 2d at 429 (“Generalized
allegations of scienter . . . based entirely on conclusory statements are insufficient to state a
claim for securities fraud.”).
By contrast, Plaintiffs’ Complaint offers the more cogent—and actual—
explanation for why Robinhood Securities put in place its purchasing restrictions: in response to
the volatility flowing through its platform and the resulting collateral deposit requirements
imposed by the NSCC—not to benefit Citadel LLC or Citadel Securities. (See Compl. ¶¶ 12, 58-
64, 77, 98 n.59, 99.) This more cogent explanation for Robinhood’s actions defeats any
inference of fraudulent intent that Plaintiffs offer. See Cohen, 722 F. Supp. 2d at 428
(allegations of scienter under Section 9(a) must be “cogent and at least as compelling as any
opposing inference of nonfraudulent intent”) (quoting Tellabs, 551 U.S. at 314).
*
*
*
In sum, Plaintiffs’ market manipulation claims are deficient in numerous respects:
Plaintiffs have not pleaded manipulative conduct or the requisite scienter. Accordingly, their
market manipulation claims should be dismissed.
II.
PLAINTIFFS DO NOT PLEAD A MISREPRESENTATION CLAIM UNDER
SECTION 10(b) OF THE SECURITIES EXCHANGE ACT.
Plaintiffs plead an extraordinary—and untenable—theory for misrepresentation
liability under Section 10(b) and Rule 10b-5. Plaintiffs identify four alleged misrepresentations,
each of which was made after Robinhood implemented the purchasing restrictions on the
Affected Stocks:
•
Mr. Tenev’s statement on the evening of January 28, after NSCC had reduced
Robinhood’s deposit requirements, that “[t]here was no liquidity problem.”
(Compl. ¶ 79);
•
Mr. Tenev’s statement on January 29 that temporary trading restrictions on certain
symbols are a common industry practice: “Brokerages and other financial
institutions do this all the time. They’ve been doing this throughout the week and
it’s just part of day-to-day, normal operations. Now, sure, Robinhood gets a lot of
attention for it, but this is just a standard part of practices in the brokerage industry
and the broader financial industry . . . . Well, again, what we’ve done is something
that other brokerages have done. It’s not unique to Robinhood to place restrictions
on purchasing certain things at certain times. Other brokers have done it.” (Id.
¶ 92);
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•
Mr. Tenev’s statement on January 31 that “other brokers basically restricted the
same activity.” (Id. ¶ 100); and
•
Mr. Tenev’s statement on January 31 that Robinhood implemented only purchase
side restrictions because “[p]eople get really pissed off if they’re holding stock and
they want to sell it and they can’t.” (Id. ¶ 101.)17
Plaintiffs contend that these allegedly false or misleading statements that
Robinhood made about its own business artificially depressed the trading prices for the Affected
Stocks—securities issued by completely unrelated companies.18 For example, Plaintiffs claim
that Robinhood made allegedly false statements about its own liquidity and about typical
practices in the brokerage industry that somehow influenced the prices of shares of GameStop,
Blackberry and Nokia (among others). (Id. ¶¶ 79, 143, 147.)
Plaintiffs never explain how any of the statements at issue, particularly where
none of the statements are false or about the Affected Stocks, could have influenced the trading
prices of the Affected Stocks at all. Indeed, all the statements Plaintiffs identified were made
after Robinhood implemented the purchase restrictions that Plaintiffs allege depressed the
Affected Stocks’ prices. Nor can Plaintiffs explain why Robinhood would have wanted to
depress the Affected Stock prices in the first place, when Plaintiffs do not allege that Robinhood
owned or bought the Affected Stocks or had any interest in whether the prices for those securities

17 Plaintiffs refer to a litany of other public statements made by Robinhood and its
executives, merely characterizing those statements as “less than candid.” (Compl. ¶¶ 11, 44-46,
53, 62, 63, 65, 67, 77, 78, 80(c), 81, 82, 96, 97, 99, 114 and 126.) Plaintiffs fail to plead with
any particularity how these other statements are in any way actionable. See Luce v.
Edelstein, 802 F.2d 49, 54 (2d Cir. 1986); see also ATSI, 493 F.3d at 99; Metzler Inv. GMBH v.
Corinthian Colleges, Inc., 540 F.3d 1049, 1070 (9th Cir. 2008) (“A litany of alleged false
statements, unaccompanied by the pleading of specific facts indicating why those statements
were false, does not meet th[e Rule 9(b)] standard.”).
18 In a typical misrepresentation case, the plaintiffs contend that alleged false statements
artificially increased the price of a security and caused harm when the plaintiffs bought that
security during the class period at an inflated price and later the truth was revealed and the price
fell. See, e.g., Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258, 265 (2014). That is a
purchaser claim. Here, Plaintiffs argue the inverse: that Robinhood’s alleged
misrepresentations decreased the prices of the Affected Stocks, allegedly causing harm when
Plaintiffs sold at depressed prices during the Class Period. (Compl. ¶¶ 143, 147.) The claim
here is a seller claim.
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decreased or increased. It is no surprise, then, that this remarkably attenuated theory fails for
each of the reasons set forth below.
A.
Plaintiffs Cannot Bring a Section 10(b) Claim Based on Robinhood’s Statements
About Its Own Business To Recover Alleged Losses from Plaintiffs’ Sale of
Securities of Other Companies.
The statutory standing requirement for a private right of action and the “in
connection with” element of Section 10(b) both prevent a plaintiff from bringing a claim against
one company, for statements about its own business, to recover losses from the plaintiff’s
purchase or sale of securities in an unrelated company. Plaintiffs’ misrepresentation claims fail
because Plaintiffs fail to meet either of these independent requirements.
1.
Plaintiffs Lack Statutory Standing.
The right of a private litigant to bring a claim under Section 10(b) and Rule 10b-5
has been implied by the courts; it is not explicitly provided for on the face of the statute or the
rule. That implied right is, however, carefully limited. Courts have circumscribed the categories
of private litigants who can bring a misrepresentation-based Section 10(b) and Rule 10b-5 claim
to those who actually transacted in the stock of the company that is the subject of the alleged
misrepresentation. Here, because Plaintiffs do not allege that they purchased or sold Robinhood
stock, they lack standing to bring a Section 10(b) and Rule 10b-5 claim based on alleged
misrepresentation about Robinhood.
This precise issue was addressed in Ontario Public Service Employees Union
Pension Trust Fund v. Nortel Networks Corp., 369 F.3d 27 (2d Cir. 2004). In Nortel, the
plaintiffs brought a Section 10(b) claim based on statements that the defendant made about its
own business, even though the plaintiffs had not transacted in the securities of the defendant.
Instead, the plaintiffs claimed that defendant’s statements impacted the price of securities of a
different business in which the plaintiffs had transacted. That is precisely what Plaintiffs allege
here. However, as the Nortel court concluded, stockholders “do not have standing to sue under
Section 10(b) and Rule 10b-5 when the company whose stock they purchased [was] negatively
impacted by the material misstatement of another company, whose stock they [did] not
purchase.” Id. at 34. Various other cases that have confronted this same issue are in accord.
See, e.g., Harbinger Capital Partners LLC v. Deere & Co., 632 F. App’x 653, 656 (2d Cir. 2015)
(affirming dismissal where shareholders of one company attempted to sue for statements made
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by another company); Menora Mivtachim Ins. Ltd. v. Int’l Flavors & Fragrances Inc.,
No. 19 CIV. 7536, 2021 WL 1199035, at *30-31 (S.D.N.Y. Mar. 30, 2021) (plaintiffs lack
statutory standing under Section 10(b) “to bring a lawsuit against [defendants] for self-referential
statements made by a company in which plaintiffs never invested”). Indeed, as a court in this
District rightly observed in dismissing the complaint in In re Altisource Portfolio Solutions, S.A.
Securities Litigation: “Plaintiffs have not identified any case holding that shareholders of one
public company have standing to bring a 10b-5 claim against another public company that
neither issued nor sold stock to those shareholders.” No. 14-81156, 2015 WL 12001262, at *4
(S.D. Fla. Sept. 4, 2015).
These standing limitations are based on a line of Supreme Court cases restricting
the scope of the private right of action under Section 10(b) and Rule 10b-5. See Nortel, 369 F.3d
at 31-33 (relying on Blue Chip Stamps); Altisource, 2015 WL 12001262, at *3-4 (relying on Blue
Chip Stamps and Stoneridge); Menora, 2021 WL 1199035 (relying on those cases plus Janus).
Beginning with Blue Chip Stamps v. Manor Drug Stores, the Supreme Court has cautioned that
the judicially created private right of action must also be “judicially delimited,” 421 U.S. 723,
749 (1975), out of “concern that the inexorable broadening of the class of plaintiff who may sue
in this area of the law will ultimately result in more harm than good,” id. at 747-48. That
concern led the Supreme Court to limit standing to assert Section 10(b) and Rule 10b-5 claims to
those who were “actual purchasers and sellers” of the security that is the subject of the alleged
misrepresentation. Id. at 731-32.19
This Court should “heed[] the Supreme Court’s instructions to not expand Section
10(b)’s private right of action beyond its present boundaries and hold[] that plaintiffs lack
standing to sue [Robinhood] for statements [it] made about [its own business].” Menora, 2021
WL 1199035, at *32. Any other approach—contrary to the Nortel holding and the other cases
cited above—would “allow any investor to sue any entity simply because that entity made

19 For example, in Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., the Supreme
Court declined to expand Section 10(b) and Rule 10b-5 to reach aiding and abetting claims
because of its view that “the § 10(b) private right of action should not be extended beyond its
present boundaries.” 552 U.S. 148, 165 (2008). And in Janus Capital Group v. First Derivative
Traders, the Court reiterated “the narrow scope that we must give to the implied private right of
action” and declined to expand liability beyond those with ultimate authority over a false
statement. 564 U.S. 135, 144 (2011).
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misrepresentations that happened to affect the price of a security purchased or sold by the
investor.” Id. at *29. As the Supreme Court has repeatedly cautioned, Section 10(b) does not
and should not extend so far. The misrepresentation claim should be dismissed because
Plaintiffs lack standing.
2.
Plaintiffs Cannot Satisfy the “In Connection With” Element.
Plaintiffs also fail to meet the “in connection with” element of Section 10(b). To
state a claim under Section 10(b) and Rule 10b-5, Plaintiffs must allege that Robinhood’s
statements occurred “in connection with” the purchase or sale of a security. 15 U.S.C. § 78j(b);
17 C.F.R. § 240.10b-5. The Supreme Court has established that the “in connection with”
requirement limits the Section 10(b) private right of action to plaintiffs “who have at least dealt
in the security to which the prospectus, representation, or omission relates.” Blue Chip Stamps,
421 U.S. at 747; see also Pelletier v. Stuart-James Co., 863 F.2d 1550, 1556 (11th Cir. 1989)
(“[Claimant] must show that the fraudulent conduct ‘touches’ the purchase or sale of
securities.”); Pross v. Katz, 784 F.2d 455, 459 (2d Cir. 1986) (defendant’s fraudulent acts must
be “integral to the purchase and sale of the securities in question”); Crummere v. Smith Barney,
Harris, Upham & Co., 624 F. Supp. 751, 755 (S.D.N.Y. 1985) (“[T]he misrepresentation must
relate to the securities alleged to satisfy the purchase and sale requirement, and not just to the
transaction in its entirety.”). Simply put, the misrepresentations must be about the Affected
Stocks.
As discussed above, none of Robinhood’s alleged false statements concerns any
of the Affected Stocks. Instead, Plaintiffs allege that Robinhood (1) made false statements about
whether Robinhood had “a liquidity problem on the morning of January 28th” and
(2) “disingenuously compared Robinhood’s [PCO] actions to those of other retail brokers.”
(Compl. ¶¶ 79, 100.) Plaintiffs do not allege that Robinhood made any statements regarding the
Affected Stocks, let alone that any of the purported false statements concern the Affected Stocks.
This is fatal to their Section 10(b) claim. See Urcuyo v. Invertec Corp., No. 05-22291-CIV, 2006
WL 8433171, at *5 (S.D. Fla. May 2, 2006) (“The Court agrees with the defendant that the
federal case law interpreting the ‘in connection with’ requirement has clearly established that the
misrepresentations at issue must relate to the fundamental nature of the securities, the attributes
that would induce an investor to buy or sell the particular securities.”); In re Nortel Networks
Case 1:21-md-02989-CMA Document 449 Entered on FLSD Docket 01/07/2022 Page 36 of 47

Corp. Sec. Litig., 238 F. Supp. 2d 613, 624 (S.D.N.Y. 2003), aff’d on other grounds sub nom.
Ontario Pub. Servs., 369 F.3d at 32; see also Saxe v. E.F. Hutton & Co., 789 F.2d 105, 108 (2d
Cir. 1986) (holding “in connection with” element not satisfied where defendants did not mislead
plaintiff “concerning the value of the securities he sold”).
B.
Plaintiffs Do Not Adequately Plead Other Essential Elements of Their Section
10(b) Misrepresentation Claim.
Plaintiffs’ misrepresentation claim also fails because Plaintiffs fail to adequately
plead a number of additional elements, specifically that any of the statements (1) were false or
misleading, (2) caused Plaintiffs’ losses or (3) were made with scienter. Plaintiffs’ Section 10(b)
and Rule 10b-5 claim for misrepresentations should be dismissed.
1.
Plaintiffs Do Not Adequately Plead Any False or Misleading Statements.
Under the PSLRA, Plaintiffs must “specify each statement alleged to have been
misleading [and] the reason or reasons why the statement is misleading.” 15 U.S.C. § 78u-
4(b)(1)(B). “A statement is misleading if in light of the facts existing at the time of the statement
a reasonable investor, in the exercise of due care, would have been misled by it.” Henningsen v.
ADT Corp., 161 F. Supp. 3d 1161, 1181-82 (S.D. Fla. 2015) (citing FindWhat, 658 F.3d at
1305). Plaintiffs fail to plead with particularity how or why any of the four statements identified
in the Complaint that Mr. Tenev made during the Class Period were false or misleading.20 (See
Compl. ¶¶ 79, 92, 100, 101.)
First, Mr. Tenev’s statement that “[t]here was no liquidity problem” was not false
or misleading. Plaintiffs’ sole basis for suggesting otherwise is that the statement was
supposedly inconsistent with an earlier internal statement made by Gretchen Howard. (Compl.
¶ 80(a).) But this Court already has concluded that the two statements are not inconsistent (see
Antitrust Tranche Decision at 46), and the Complaint is devoid of any further allegations
suggesting otherwise. As this Court found, the statements are consistent because, “[e]ven

20 Plaintiffs allege a number of other statements by Robinhood, but they were all made either
before or after the Class Period. For example, Plaintiffs refer to Jim Swartwout’s statement on
February 8. (See Compl. ¶ 57.) That statement occurred after the Class Period (see id. ¶ 128)
and therefore is not actionable. See Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir.
1993) (holding statements made after the relevant purchase or sale of securities are not
actionable).
Case 1:21-md-02989-CMA Document 449 Entered on FLSD Docket 01/07/2022 Page 37 of 47

viewing the pleading in the light most favorable to Plaintiffs, Howard was likely referring to
Robinhood’s ability to pay the increased collateral requirements caused by the market volatility,
which is consistent with Robinhood later placing the blame on these collateral requirements.”
(Id. at 46-47.) Moreover, Mr. Tenev’s statement was true as a matter of fact; Robinhood
ultimately had no liquidity problem and met all its deposit requirements. (See Compl. ¶ 80(c).)
Second, Mr. Tenev’s two statements concerning the activities of other brokers
were not false or misleading. Specifically, Mr. Tenev said that brokerages and other financial
institutions implement trading restrictions all the time, that they had been doing so throughout
the week of January 28 and that trading limitations were common, day-to-day measures that
brokerages may apply. (See Compl. ¶ 92.) Mr. Tenev also said that “other brokers basically
restricted the same activity.” (Id. ¶ 100.) The only support that Plaintiffs provide to argue that
these two statements were false is that the restrictions Robinhood implemented were not exactly
the same as those implemented by other brokers. (Id. ¶ 93.) But it is clear from Mr. Tenev’s
statement that he was not claiming that Robinhood’s restrictions were exactly the same as those
implemented by other brokers. Instead, Mr. Tenev was explaining the general industry practice
of implementing restrictions in response to volatility and stating the (true) fact that Robinhood
was one of several brokers that restricted purchases of volatile securities during the week of
January 28. (See id. ¶ 92 n.54.)21 Indeed, Plaintiffs themselves allege that other brokers also
implemented trading restrictions during that week (id. ¶ 93) and, as the Court knows, the
Antitrust Plaintiffs alleged (unsuccessfully) in another tranche of this MDL that brokers
conspired together to impose these trading restrictions. (See Antitrust Tranche Decision at
49-50.) No reasonable investor would have understood Mr. Tenev’s statements to mean that
Robinhood’s restrictions were exactly the same as those implemented by other brokers. Indeed,
because the restrictions imposed by other brokers were publicly disclosed, investors would not

21 Plaintiffs partially quote from Mr. Tenev’s interview with Alexis Christoforous on Yahoo!
Finance, which is available online in its entirety. See Robinhood CEO: We ‘made the right
decision’ in response to potential investigation, Yahoo! Finance (Jan. 29, 2021),
https://www.yahoo.com/lifestyle/robinhood-ceo-made-decision-response-204254105.html (last
visited Jan. 6, 2022). The Court may consider the full transcript in which Mr. Tenev’s statement
appears because it is incorporated by reference into the Complaint (Compl. ¶ 92) and is central to
Plaintiffs’ claims, and the authenticity of its contents is not disputed. See Harris v. Ivax Corp.,
182 F.3d 799, 802 n.2 (11th Cir. 1999) (considering, at motion to dismiss, the full contents of
document in which allegedly false statements appeared).
Case 1:21-md-02989-CMA Document 449 Entered on FLSD Docket 01/07/2022 Page 38 of 47

have been misled by the statements. As a result, Mr. Tenev’s statements were not false or
misleading.
Third, Mr. Tenev’s statement that Robinhood implemented purchasing
restrictions, while leaving sales unrestricted, because customers prefer being able to sell was not
false or misleading. (See id. ¶ 101.) Plaintiffs advance two theories for falsity, both of which
fail. Plaintiffs first suggest that the statement must be false because “Tenev’s explanation for the
one-sided trading halt does not appear in the internal chats on the subject.” (Id. ¶ 102.) Even if
that were true, it does not render the statement false. In fact, Plaintiffs are expressly contradicted
by the Robinhood documents on which they rely—here, the sworn affidavit submitted by Shiv
Verma, Robinhood Markets’ Head of Treasury, in Cobos v. Robinhood Financial, et al., which
detailed the decision-making process for implementing the PCO restrictions on January 28 and
noted that Robinhood Financial permitted customers to sell their positions “[t]o provide
flexibility for customers with existing positions.” (Id. ¶ 59); (Declaration of Shiv Verma ¶¶ 13-
14, Cobos v. Robinhood Financial, et al., No. 21-cv-00835 (C.D. Cal. Feb. 8, 2021), ECF No.
27-2).22
Plaintiffs also suggest that Mr. Tenev’s statement must be false because it is
inconsistent with his later statement that the decision to PCO was made to help address growing
deposit requirements. (See Compl. ¶ 103.) But the statements are entirely consistent.
Mr. Tenev’s later statement explained why Robinhood implemented any restrictions: because of
rising deposit requirements. His first statement explained why Robinhood implemented
purchase restrictions, while leaving sales unrestricted: because of customer preferences.
Moreover, Robinhood had little reason to restrict sales at the time because doing so would not
have addressed the reason for Robinhood’s increased deposit requirements. That is because the
volatility multiplier that NSCC assigned, and the resulting exponential increase in Robinhood’s
deposit requirements, was driven by Robinhood customers’ net open purchase orders for shares.
As a result, prohibiting sales would not have meaningfully decreased Robinhood’s deposit

22 The Court may consider this portion of Mr. Verma’s Declaration because it is
incorporated by reference into the Complaint (Compl. ¶¶ 59-60), is central to Plaintiffs’ claims,
and the authenticity of its contents is not disputed. (See supra note 21.)
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requirements. (See id. ¶¶ 99, 103, 106.) Robinhood therefore had no reason to restrict sales and,
as Mr. Tenev explained, doing so would have been inconsistent with customer preferences.
Plaintiffs offer no other reasons “why the statement[s] [are] misleading” and
therefore fail to meet the heightened pleading standards of Rule 9(b) and the PSLRA. Fed. R.
Civ. P. 9(b); 15 U.S.C. § 78u-4(b)(1).
2.
Plaintiffs Do Not Adequately Plead Loss Causation.
Plaintiffs also fail to plead loss causation, i.e., how the alleged misleading
statements made by Robinhood—which concerned Robinhood, not the issuers of the Affected
Stocks—caused a decline in the trading prices for the Affected Stocks. To show loss causation,
Plaintiffs must prove “a causal connection between the misrepresentation and the investment’s
subsequent decline in value.” Robbins v. Koger Properties, Inc., 116 F.3d 1441, 1448 (11th Cir.
1997); 15 U.S.C. § 78u-4(b)(4) (requiring that the plaintiff prove that the alleged
misrepresentation “caused the loss for which the plaintiff seeks to recover”). A plaintiff is
required to adequately plead loss causation in the complaint. See Dura Pharms., Inc. v. Broudo,
544 U.S. 336, 346 (2005). Specifically, Plaintiffs must allege “not only that a fraudulent
misrepresentation artificially inflated [or deflated] the security’s value but also that the fraud-
induced inflation [or deflation] that was baked into the plaintiff’s purchase [or sale] price was
subsequently removed from the stock’s price, thereby causing losses to the plaintiff.” Meyer v.
Greene, 710 F.3d 1189, 1195 (11th Cir. 2013) (internal quotations and citations omitted). This
loss causation element is particularly important in this case, where (as discussed above) Plaintiffs
bring a novel misrepresentation claim against Robinhood based on statements about its own
business to recover losses from Plaintiffs’ transactions in other companies’ securities.
Typically, Section 10(b) and Rule 10b-5 plaintiffs allege loss causation by
identifying supposed corrective disclosures that revealed the falsity of the defendant’s prior
statements and caused stock prices to fall from artificially inflated levels. See In re Williams Sec.
Litig.–WCG Subclass, 558 F.3d 1130, 1137 (10th Cir. 2009) (“Loss causation is easiest to show
when a corrective disclosure reveals the fraud to the public and the price subsequently drops—
assuming, of course, that the plaintiff could isolate the effects from any other intervening causes
that could have contributed to the decline.”); FindWhat, 638 F.3d at 1312 (“Loss causation is
adequately pled by alleging ‘that the market reacted negatively to a corrective disclosure
Case 1:21-md-02989-CMA Document 449 Entered on FLSD Docket 01/07/2022 Page 40 of 47

regarding the falsity of [the defendant’s prior statements.’”) (quoting Lentell v. Merrill Lynch &
Co., 396 F.3d 161, 175 (2d Cir. 2005)). Here—given that Plaintiffs bring a seller claim, the
inverse of the more usual purchaser claim—Plaintiffs must allege that Robinhood’s
misstatements artificially decreased the Affected Stock prices, and that, when the market learned
that Robinhood’s statements were false, this deflation was removed from the Affected Stock
prices, causing prices to rise. They have alleged neither.
First, Plaintiffs have not identified how any of Robinhood’s alleged
misrepresentations depressed the prices of the Affected Stocks in the first place. Plaintiffs
merely offer a conclusory allegation, in a single sentence, that Robinhood’s statements “further
drove down the share prices of the Affected Stocks.” (See Compl. ¶ 68.) But Plaintiffs have
failed to allege any causal connection between the alleged misrepresentations and any decrease
in the Affected Stock prices. Plaintiffs offer no plausible explanation for why the Affected Stock
prices would have been impacted by whether Robinhood had a liquidity problem or whether
Mr. Tenev had misrepresented that the restrictions Robinhood implemented were the same as
those implemented by other brokers. Indeed, the trading restrictions imposed by other brokers
also were publicly disclosed; there is no reason to believe that Mr. Tenev’s statements about
those restrictions could have influenced the Affected Stock prices. Instead, Plaintiffs allege that
the Affected Stock prices decreased because of Robinhood’s decision to PCO. (See id. ¶¶ 69,
140.) But absent allegations that Robinhood’s alleged misrepresentations—as opposed to the
trading restrictions—caused Plaintiffs’ alleged losses, their misrepresentation claim fails as a
matter of law. See Dura, 544 U.S. at 345-48 (dismissing Section 10(b) claims for failure to
allege loss causation where the complaint alleged only that plaintiffs paid “artificially inflated
prices” and “suffered damages”). Plaintiffs here offer no more allegations of loss causation than
did the plaintiffs in Dura.
Second, Plaintiffs fail to allege that the prices of the Affected Stocks ever
increased because the market learned that Robinhood’s statements were false. Such allegations
are necessary, however, to establish for a Section 10(b) claim that Plaintiffs suffered losses as a
result of Robinhood’s alleged misrepresentations. As the Eleventh Circuit has explained, it is
only when “the wool is eventually pulled from the market’s eyes and the truth becomes known
about the company’s misrepresentation” that a change “in stock price in reaction to the revelation
. . . will have been caused by the fraud and will be compensable.” Meyer, 710 F.3d at 1196. The
Case 1:21-md-02989-CMA Document 449 Entered on FLSD Docket 01/07/2022 Page 41 of 47

reason for this loss causation pleading rule is that a court cannot credit the assertion that the price
of a security was artificially inflated (or deflated) due to a misrepresentation unless the plaintiff
can allege that when the truth came out (the corrective disclosure for the alleged
misrepresentation), the security’s price declined (or increased) to its true value. See Dura, 544
U.S. at 344 (plaintiff must show that true “facts become generally known” and “as a result share
value depreciates”) (quotations and alterations omitted). Because Plaintiffs fail to allege that the
market ever learned that Robinhood’s statements were false, through corrective disclosures or
otherwise—let alone a resulting adjustment in the Affected Stock prices—Plaintiffs have not
pleaded loss causation, i.e., that Robinhood’s alleged misrepresentations caused an artificial
deflation in the Affected Stock prices during the Class Period.23 See Dura, 544 U.S. at 347
(dismissing complaint for “failure to claim that Dura’s share price fell significantly after the truth
became known”). Plaintiffs’ misrepresentation claims should therefore be dismissed for failure
to plead loss causation.
3.
Plaintiffs Do Not Adequately Plead Scienter.
Plaintiffs do not plead particularized facts that give rise to the required “strong
inference” of scienter, 15 U.S.C. § 78u-4(b)(2)(A), for any of the four alleged misstatements at
issue. Nowhere do Plaintiffs allege—as they must—that Mr. Tenev “intended to deceive
investors by artificially affecting the market price of [the Affected Stocks].” ATSI, 493 F.3d
at 102. For the reasons that follow, Plaintiffs’ half-hearted attempts to suggest the existence of
scienter fail.
The “no liquidity problem” statement. Plaintiffs offer three reasons to infer
that Mr. Tenev’s statement that there was “no liquidity problem” was made with scienter: (1) it
was allegedly contradicted by an earlier internal message from Ms. Howard, Robinhood
Markets’ COO, which referred to a “major liquidity problem” (Compl. ¶ 80(a)); (2) it was

23 Indeed, as noted above, because the restrictions implemented by other brokers were
publicly disclosed, the market knew all the relevant information concerning Mr. Tenev’s
statements about other brokers when the statement was made. Plaintiffs therefore cannot allege,
as they must, that the market learned the supposed “truth” after Plaintiffs sold their Affected
Stock shares, causing them losses.
Case 1:21-md-02989-CMA Document 449 Entered on FLSD Docket 01/07/2022 Page 42 of 47

supposedly made to protect Robinhood’s eventual IPO (id. ¶¶ 80(b)-(c)); and (3) Mr. Tenev
reiterated that any liquidity issue “was not the case with Robinhood” (id. ¶ 80(d)).
Plaintiffs’ first argument—Ms. Howard’s earlier-in-time internal message
referring to a “liquidity problem”—does not support an inference of scienter because, as
discussed above (supra Section II.B.1), Mr. Tenev’s and Ms. Howard’s statements “are not
conflicting.” (See also Antitrust Tranche Decision at 46.) And even if Ms. Howard was right
that there was a liquidity problem before NSCC waived the collateral special charge, it still does
not suggest that Mr. Tenev made his statement with scienter. By the time Mr. Tenev made his
statement, NSCC had waived the special charge, which this Court has already concluded was the
basis for Ms. Howard’s earlier statement, and Robinhood had paid its collateral deposit
requirement. (Id. at 46-47.)
Plaintiffs’ second argument—that Mr. Tenev acted to “protect” Robinhood’s
then-potential future IPO—also fails to support an inference of scienter because Robinhood’s
IPO is irrelevant to the price of the Affected Stocks. The success or failure of Robinhood’s IPO
was not connected to the prices of the Affected Stocks. Even if (as Plaintiffs allege) Mr. Tenev
made his statement to protect Robinhood’s eventual IPO—which would not occur for another six
months—that does not support an inference that Mr. Tenev intended to deceive investors about
the Affected Stocks. Further, as discussed above in Section I.B, even if Mr. Tenev’s statement
protected the IPO and helped the company generally continue to profit, a general motive to profit
is inadequate to allege scienter as a matter of law. See Chill v. Gen. Elec. Co., 101 F.3d 263, 268
(2d Cir. 1996) (“The motive to maintain the appearance of corporate profitability . . . will
naturally involve benefit to a corporation, but” is insufficient to allege scienter.). Such
allegations are inadequate because they generally apply to all companies. Consequently, “[i]f
scienter could be pleaded on that basis alone, virtually every company in the United States that
experiences a downturn in stock price could be forced to defend securities fraud actions.” Id.
(citations omitted). Plaintiffs’ suggestion that Mr. Tenev acted with scienter out of a desire to
protect Robinhood’s IPO is therefore insufficient to allege scienter as a matter of law.
Plaintiffs’ third argument—that Mr. Tenev reiterated his statement that liquidity
issues were “not the case with Robinhood”—does not support an inference of scienter because
the repetition only underscores Robinhood’s consistent explanations about the business’s
capitalization. As Mr. Tenev truthfully explained, Robinhood did not have a liquidity problem
Case 1:21-md-02989-CMA Document 449 Entered on FLSD Docket 01/07/2022 Page 43 of 47

and paid all its deposit requirements in full. Additionally, Mr. Tenev repeating his statement
“would make little sense if [Robinhood] had a plan to deceive the public on these very issues.”
Henningsen, 161 F. Supp. 3d at 1204 (rejecting an inference of scienter in light of repeated
public statements). Therefore, Mr. Tenev’s consistency supports an alternative, and more
persuasive, inference, i.e., that he believed his statement was truthful and had no intent to
deceive when he made it. See Tellabs, 551 U.S. at 310 (“A court must consider plausible,
nonculpable explanations for the defendant’s conduct” before finding a strong inference of
scienter.). Plaintiffs have therefore pleaded no facts indicating that Mr. Tenev made the
statement that Robinhood had “no liquidity problem” with scienter.
The “part of practices in the brokerage industry” statement. Plaintiffs do not
even attempt to plead scienter with respect to Mr. Tenev’s second statement, that temporary
trading restrictions on certain symbols are a common practice in the brokerage industry. (See
Compl. ¶ 92.) They allege only that Mr. Tenev made the statement to minimize supposed
differences between Robinhood’s restrictions and those of other brokers. (Id.) Even if that is
true, it does not suggest that Mr. Tenev made the statement with any intent to deceive investors
concerning the Affected Stocks. Indeed, there is no strong inference of scienter because lying
about other brokers’ practices, which were publicly known at the time, would have been illogical
and futile. See In re GeoPharma, Inc. Sec. Litig., 399 F. Supp. 2d 432, 449-51 (S.D.N.Y. 2005)
(finding no strong inference of scienter because the alleged misrepresentation was inconsistent
with publicly available information and therefore “the alleged scheme could not possibly have
succeeded”). Plaintiffs have therefore pleaded no fact supporting an inference of scienter for the
second statement.
The “other brokers basically restricted the same activity” statement.
Plaintiffs seek to infer scienter from their contention that Mr. Tenev “knew (or should have
known on a matter of such critical importance)” that Robinhood’s restrictions were not the same
as those of other brokers, and therefore, the falsity of the statement supports an inference of
scienter. (Id. ¶ 100.) But even if Robinhood’s restrictions on January 28 and 29 differed in some
respects from the restrictions other brokers imposed, that is nevertheless insufficient to support a
strong inference that Mr. Tenev made his statement with scienter. Plaintiffs concede that other
brokers also implemented trading restrictions during the same time period. (Id. ¶ 93.) Indeed,
such restrictions are generally consistent with industry practice. (Id. ¶ 92.) Because the other
Case 1:21-md-02989-CMA Document 449 Entered on FLSD Docket 01/07/2022 Page 44 of 47

brokers’ restrictions were publicly known, it also would have been irrational for Mr. Tenev to lie
about them. See GeoPharma, 399 F. Supp. 2d at 450-51. Rather than suggest that Mr. Tenev
acted with scienter, those facts support the more plausible—and actual—explanation for
Mr. Tenev’s statement: that he was explaining how Robinhood was not the only broker to
implement restrictions in response to the market volatility that occurred during the week of
January 28.
The “customer preferences” statement. As with the industry practices
statement above, Plaintiffs make no attempt to plead scienter with respect to Mr. Tenev’s fourth
statement, that Robinhood implemented buy-side restrictions because of customer preferences.
(Id. ¶ 101.) Nor would it make sense to infer an intent to deceive, as it stands to reason that
customers prefer the option to sell off their position in whole or in part to being locked in to their
position by a total restriction on both purchases and sales.
Plaintiffs’ claims fall far short of pleading facts supporting a “strong inference” of
scienter. 15 U.S.C. § 78u-4(b)(2)(A). Accordingly, Plaintiffs’ misrepresentation claim should
be dismissed.
III.
PLAINTIFFS’ CLAIMS SHOULD BE DISMISSED WITH PREJUDICE.
All of Plaintiffs’ claims should be dismissed with prejudice. While Plaintiffs fail
adequately to plead numerous elements of their claims, the incurable nature of the shortcomings
in Plaintiffs’ claims is readily apparent. Plaintiffs’ market manipulation claims should be
dismissed with prejudice because the fact that Robinhood’s purchase restrictions were fully
disclosed, and therefore not manipulative, is a fundamental defect in Plaintiffs’ theory of the case
that cannot be cured through amendment. Similarly, Plaintiffs’ lack of statutory standing and
inability to satisfy the “in connection with” element are inherent flaws in Plaintiffs’
misrepresentation claim and are not curable.
CONCLUSION
For the foregoing reasons, Robinhood respectfully submits that the Amended
Consolidated Class Action Complaint for the Securities Tranche should be dismissed with
prejudice for failure to state a claim.

Case 1:21-md-02989-CMA Document 449 Entered on FLSD Docket 01/07/2022 Page 45 of 47

Dated: January 7, 2022
/s/ Samuel A. Danon
HUNTON ANDREWS KURTH LLP
Samuel A. Danon (FBN 892671)
Gustavo Javier Membiela (FBN 513555)
María Castellanos Alvarado (FBN 116545)
333 S.E. 2 Avenue, Suite 2400
Miami, FL 33131
Telephone: (305) 810-2500
Facsimile: (305) 810-2460
sdanon@huntonak.com
gmembiela@huntonak.com
mcastellanos@hunton.com
CRAVATH, SWAINE & MOORE LLP
Antony L. Ryan
Kevin J. Orsini
Brittany L. Sukiennik
825 Eighth Avenue
New York, NY 10019
Telephone: (212) 474-1000
Facsimile: (212) 474-3700
aryan@cravath.com
korsini@cravath.com
bsukiennik@cravath.com
Counsel for Defendants Robinhood Markets,
Inc., Robinhood Financial LLC and
Robinhood Securities, LLC

Case 1:21-md-02989-CMA Document 449 Entered on FLSD Docket 01/07/2022 Page 46 of 47

CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on January 7, 2022, I electronically filed the foregoing
document with the Clerk of the Court using CM/ECF. I further certify that the foregoing
document is being served this day on all counsel of record via transmission of Notices of
Electronic Filing generated by CM/ECF or in some other authorized manner for those counsel or
parties who are not authorized to receive Notices of Electronic Filing.

Dated: January 7, 2022
/s/ Samuel A. Danon
Samuel A. Danon (FBN 892671)

Case 1:21-md-02989-CMA Document 449 Entered on FLSD Docket 01/07/2022 Page 47 of 47

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