Amid GameStop controversy, Naperville attorney sues investor app over trading halt

“The halting of trading of these stocks was to protect institutional investment at the detriment of retail customers,” Richard Joseph Gatz wrote in the suit filed Thursday in federal court.

SHARE Amid GameStop controversy, Naperville attorney sues investor app over trading halt

The online trading platform Robinhood moved to restrict trading in GameStop and other stocks that have soared recently due to rabid buying by smaller investors.


A Naperville attorney on Thursday sued a California financial services company that runs a stock-trading app at the center of a controversy sparked by swarms of small investors pumping up the stock value of the video game retailer GameStop and other floundering companies in an effort to punish institutional short sellers.

The lawsuit, filed by Richard Joseph Gatz in the U.S. District Court for the Northern District of Illinois, seeks an injunction against Robinhood Financial, which on Thursday restricted transactions of GameStop and other stocks Reddit users have feverishly been snapping up in a bid to stick it to Wall Street.

Gatz states that he owns two options contracts for Blackberry stock, which is among the 13 companies targeted by Robinhood. However, according to Gatz, the firm has “continued to allow trading for institutional investors.”

“On information and belief, the halting of trading of these stocks was to protect institutional investment at the detriment of retail customers,” he wrote. “Furthermore, this appears to be in lock-step with other securities trading platforms, such as Ally Financial, TD Ameritrade and potentially others.”

Gatz claimed in the suit that the “amount in controversy” is more than $75,000, not including interest or court costs.

“The halt of retail trading for these stocks has caused irreparable harm and will continue to do so,” wrote Gatz, who declined to comment.

Shares of Blackberry stock jumped from $6.58 on Jan. 4 — the first day of trading this year — to $25.10 a share on Wednesday afternoon. The stock later closed at $24.97 on Wednesday before tumbling even further to $14.65 a share on Thursday. GameStop’s stock value also took a serious dive Thursday after previously jumping tenfold in recent weeks.

The stock-buying campaign that prompted the spikes was reportedly coordinated by members of Reddit’s WallStreetBets forum that favor trading apps like Robinhood.

In a statement Thursday, Robinhood said it was restricting certain transactions based on “significant market volatility.” Later Thursday, Robinhood CEO Vlad Tenev said the company now plans to “allow limited buys of these securities” starting Friday.

“We’ll continue to monitor the situation and make adjustments as needed,” Tenev tweeted.

Robinhood didn’t respond to an email seeking comment on Gatz’s lawsuit. The company also faces a class-action suit filed Thursday in federal court in Manhattan over its decision to restrict trading of GameStop stock.

Firm tied to Illinois’ richest man denies directing Robinhood

Meanwhile, Illinois’ richest man, Ken Griffin, has found himself at the center of the controversy, which has roiled Wall Street.

Citadel Securities — a company affiliated with Griffin’s massive hedge fund and financial services company, Citadel — has been Robinhood’s biggest customer, according to a filing Robinhood submitted to the Securities and Exchange Commission last year. As part of the relationship, Robinhood sends trade orders to Citadel Securities and receives a small payment. Then Citadel Securities turns around and completes trades, banking a small payment for itself.

Furor grew over that revelation after Citadel and another hedge fund were dumping $2.75 billion into Melvin Capital, a New York City hedge fund that took an apparently massive hit after betting against the GameStop stock. According to a news release, $2 billion of that infusion will come from Citadel and its partners.

Amid online accusations that Citadel Securities was involved in Robinhood’s decision to halt certain trading, Citadel Securities issued a statement Thursday claiming it “has not instructed or otherwise caused any brokerage firm to stop, suspend or limit trading or otherwise refuse to do business.” Tenev, Robinhood’s chief executive, also noted Thursday that the decision to halt some trading “was not made on the direction of any market maker we route to or other market participants.”

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