One of the principal figures in a group of Reddit investors who drove a huge surge in GameStop’s share price in January is being sued in federal court, in a class-action complaint alleging securities fraud.
The lead plaintiff, a Washington state investor, suffered “substantial financial losses,” when he used $200,000 to speculate on GameStop’s price, when the company’s stock was below $100. It then went skyrocketing to a record closing price of $347.51 on Jan. 27, in a story that caught mainstream media’s fascination for more than a week.
The lawsuit says Keith Gill of Massachusetts — known on Reddit as “DeepFuckingValue” and on YouTube as “Roaring Kitty” — is a shrewd investor representing himself as an average joe who beat big-time investors at a shady game. The lawsuit says Gill instead made $48 million, cashing out from his day job as a licensed trader with MassMutual in Boston.
The individual suing Gill, Christian Iovin, alleges Gill was illegally manipulating GameStop’s share price by encouraging his YouTube and Reddit audience to hold all their shares of GameStop, causing what’s called a “short squeeze” that artificially spiked the price.
“Gill, however, is no amateur (and no Robin Hood),” says the lawsuit. “For many years, he actively worked as a professional in the investment and financial industries. He holds extensive securities licenses and qualifications, including a securities principal and supervisory management license and a Charted Financial Analyst license. Indeed, at the time Gill was inciting the market frenzy with his fake persona, he was licensed by MML as a registered representative (i.e., a securities broker), and he was employed by MassMutual as a ‘Financial Wellness Director.’
Iovin’s suit also names MassMutal as a defendant, and alleges it had a responsibility to supervise and control Gill up to the day he resigned (on Jan. 28). Iovin does not say what his actual damages were; with short-sellers effectively betting the price of GameStop stock would go down, their losses spiraled out of control. In one well-known example, the hedge fund Melvin Capital needed a $2.75 billion infusion of capital when it finally got out of the stock position.
On Feb. 3 The New York Times reported that Massachusetts’ attorney general had subpoenaed Gill and was investigating his day job’s role in the GameStop surge. And on Thursday, Gill and the chief executives of Reddit and the trading app Robinhood are due to appear before the House Financial Services Committee.
GameStop is currently trading around $45 a share.