Roaring Kitty: Legal Or Illegal?

In 2024, Keith Gill, known as 'Roaring Kitty', faced a lawsuit accusing him of securities fraud and stock manipulation. Gill, who had previously gained notoriety for his role in the 2021 GameStop short squeeze, was alleged to have engaged in a pump-and-dump scheme, causing GameStop's share price to fluctuate wildly. The lawsuit was voluntarily withdrawn, but it raised questions about the legality of Gill's actions and the potential for market manipulation. With his large online following and influence on stock prices, Gill's activities continue to be closely watched by investors and market observers.

Is posting memes illegal?

Posting memes is not, in itself, illegal. However, the content of the memes and the context in which they are posted can be important factors in determining whether a law has been broken.

In the case of 'Roaring Kitty' Keith Gill, the line between legal and illegal activity is blurred. Gill, who had previously appeared before Congress in 2021 for his involvement in the GameStop short squeeze, returned to social media in 2024. His now-famous May 13, 2024, tweet featured a man holding what looked like a video game controller, which caused GameStop's stock to leap from $17.46 to $30.45. Over the next four days, Gill posted over 100 cryptic memes on his TheRoaringKitty account, each leaving his over one million followers to decipher his meaning.

This activity led to questions about whether Gill was manipulating the market, particularly as he did not explicitly mention GameStop in his posts. According to securities lawyers, the opinions on whether Gill had broken the law varied. Some argued that he hadn't crossed any lines and that it would be challenging to prove market manipulation or that he had deceived investors. However, others suggested that he should have known how his posts would affect market prices, and his actions could be considered indirect manipulation.

While posting memes is generally legal, the potential for scrutiny and legal consequences exists if the content is deemed to manipulate or deceive, especially in contexts involving finance and securities.

Did Roaring Kitty manipulate the market?

Roaring Kitty, or Keith Gill, is a popular stocks influencer and amateur trader who has become well-known for his involvement in the 2021 GameStop short squeeze. With over a million followers across his YouTube channel and Reddit page, Gill's social media posts have been known to cause significant fluctuations in the stock market. This has led to questions about whether he has crossed the line into stock manipulation and if his activities are legal.

In 2024, Gill was sued by a group of GameStop investors led by Martin Radev, who accused him of securities fraud and manipulating the market through a "pump-and-dump" scheme. The lawsuit was filed in Brooklyn, New York's federal court but was voluntarily withdrawn just days later, with no explanation given. The lawsuit alleged that Gill had quietly accumulated large quantities of GameStop stock and call options during a two-week period in May and June 2024, causing the share price to fluctuate wildly. It also claimed that Gill's social media posts, including a cryptic meme featuring a man holding a video game controller, were deliberately designed to manipulate the market and generate profits for himself at the expense of other investors.

However, opinions are divided among securities lawyers as to whether Gill's actions constitute illegal market manipulation. Some argue that he hasn't crossed any legal lines, as there is no explicit mention of GameStop in his communications, and proving market manipulation requires demonstrating a deliberate attempt to manipulate stock, a financial interest in that stock, and the creation of an artificial price. Others suggest that he may have known or should have known the consequences of his actions, given his track record and the context of his posts.

While the 2024 lawsuit against Gill was dropped, his activities continue to attract scrutiny from legal and financial professionals, as well as the SEC. His large social media following and the significant impact of his posts on stock prices suggest that he wields considerable influence in the market. This influence has been compared to a "magic" ability to move stocks and cryptocurrencies, with some analysts suggesting that his focus on certain retailers may be part of a deliberate strategy.

In conclusion, while Roaring Kitty's activities have not been proven to be illegal, the question of whether he is manipulating the market is a complex and highly debated topic. His influence on stock prices and the potential impact on other investors remain areas of concern for legal and financial experts.

Was there a deliberate attempt to manipulate stock?

There is a difference of opinion on whether Keith Gill, aka Roaring Kitty, deliberately attempted to manipulate stock.

Christina Sautter, a professor at the Dedman School of Law at Southern Methodist University, says Gill hasn't broken any rules. According to Sautter, there are two paths to proving market manipulation under securities laws. Courts require three things to prove a violation of Section 9(a)(2): a deliberate attempt to manipulate a stock, a financial interest in that stock, and the creation of an artificial price. Rule 10(b)(5) targets actions that deceive investors by artificially inflating or deflating stock prices. Sautter argues that Gill's actions don't meet either of these criteria.

Peter Molk, a professor at the University of Florida, acknowledges that there is an argument to be made that Gill hasn't broken any rules, as he never referenced GameStop by name in his posts. However, Molk also highlights that there is an argument in the other direction, stating that someone can be liable if he knew or should have known the consequences of his actions. Given Gill's history with GameStop, it could be argued that he should have known how his posts would affect market prices.

Joan MacLeod Heminway, a law professor at the University of Tennessee, suggests that it may be too early to tell whether Gill's posts constitute market manipulation. She states that it is difficult to make a claim of manipulation without the benefit of hindsight.

On the other hand, some investors accused Gill of deliberately manipulating stock for his own gain. A proposed class action lawsuit filed in Brooklyn, New York's federal court by GameStop shareholder Martin Radev accused Gill of securities fraud, claiming that he had quietly accumulated large quantities of stock and call options, then dumped some holdings after emerging from a three-year social media hiatus, causing GameStop's share price to gyrate wildly and generating "millions of dollars" in profit for him. The lawsuit was later voluntarily withdrawn without explanation, but it can be refiled.

Additionally, the Wall Street Journal reported that E*Trade, where Gill has an account, started their own review and considered kicking him off the platform over concerns of "potential stock manipulation."

Did Roaring Kitty engage in a 'pump and dump' scheme?

In 2024, Keith Gill, better known as Roaring Kitty, was sued for engaging in a "pump-and-dump" scheme with GameStop stock. Gill, a former financial analyst for MassMutual, was accused of securities fraud by several GameStop shareholders in a Brooklyn federal court.

The lawsuit alleged that Gill had engaged in a pump-and-dump scheme by posting an item on Reddit, in which he revealed to investors that he had amassed a considerable stake in GameStop without disclosing when he bought the options. This revelation caused GameStop's stock price to soar by as much as 75%.

However, opinions vary on whether Gill had actually broken any rules. Christina Sautter, a professor at the Dedman School of Law, argued that Gill hadn't crossed any legal lines as his actions didn't meet the requirements to prove a violation of securities laws. She stated that there needs to be a deliberate attempt to manipulate a stock, a financial interest in that stock, and the creation of an artificial price to prove market manipulation.

On the other hand, Peter Molk, a professor at the University of Florida, said that there could be an argument for market manipulation given Gill's history with GameStop and the impact of his posts on market prices. Charles Korsmo, a law professor at Case Western Reserve, also acknowledged that while Gill's actions might not be deceptive, they could still invite scrutiny from the SEC as they involve making large sums of money by doing things that seem unrelated to the normal functioning of securities markets.

The lawsuit against Roaring Kitty was dropped within days of its filing, but it is unclear why. The dismissal was without prejudice, which means the plaintiff is free to file the suit again.

Did Roaring Kitty break securities laws?

The actions of Keith Gill, also known as Roaring Kitty, have led to questions about whether he has broken securities laws.

Roaring Kitty is a popular stocks influencer who has amassed over a million followers across his YouTube channel and Reddit page. In 2021, he was a prominent figure in the GameStop short squeeze, which saw amateur traders mobilise on platforms like Reddit to boost shares in the games retailer. This led to a volatile surge in the company's stock market value, causing substantial losses for hedge funds and professional investors that had shorted against the company.

In 2024, Gill re-emerged after three years of silence with a now-famous tweet featuring a man holding what looks like a video game controller. This was followed by over 100 cryptic posts on his X account, which led to a surge in GameStop's stock price. Gill then revealed that he owned 5 million GameStop shares and 120,000 call options, later selling the call options but increasing his share ownership to 9 million. This activity led to accusations of market manipulation and a proposed class-action lawsuit from GameStop shareholder Martin Radev, who claimed Gill had engaged in a "pump-and-dump" scheme.

However, opinions vary among securities lawyers as to whether Gill has broken any rules. Christina Sautter, a professor at the Dedman School of Law, argues that Gill hasn't crossed any lines and hasn't provided enough evidence of a manipulative motive to prove a violation of securities laws. Peter Molk, a professor at the University of Florida, acknowledges that Gill's lack of direct references to GameStop weighs against market manipulation liability, but also notes that he may still be liable if he knew or should have known the consequences of his actions.

The lawsuit against Gill was voluntarily withdrawn, but it could be refiled in the future. While Gill has not been found guilty of any securities law violations, his activities have sparked intense debate and scrutiny, with some arguing that his actions constitute market manipulation.

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