`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF FLORIDA
`
`CASE NO. 21-2989-MDL-ALTONAGA/Torres
`
`
`In re:
`
`JANUARY 2021 SHORT SQUEEZE
`TRADING LITIGATION
`_________________________________/
`
`This Document Relates to the Antitrust Actions
`
`
`ORDER
`
`THIS CAUSE came before the Court on Defendants’1 Motion to Dismiss the Antitrust
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`Tranche Complaint [ECF No. 408]. Plaintiffs2 filed a [Response] in Opposition [ECF No. 413],
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`to which Defendants filed a Reply [ECF No. 419]. The Court has carefully considered The
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`Corrected Consolidated Class Action Complaint (the “CCAC”) [ECF No. 416], the parties’ written
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`submissions, the record, and applicable law. For the following reasons, the Motion is granted.
`
`I.
`
`BACKGROUND
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`This putative class action is brought on behalf of individual investors (the “Retail
`
`Investors”) who suffered losses as a result of Defendants’ response to a “short squeeze” — a
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`situation in which stocks or other assets rise sharply in value, distressing short positions.3 (See id.
`
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`1 The Defendants are E*Trade Securities LLC; E*Trade Financial Holdings, LLC; Interactive Brokers LLC;
`Robinhood Markets, Inc.; Robinhood Financial LLC; Robinhood Securities, LLC; Citadel Securities
`LLC; Apex Clearing Corp.; Electronic Transaction Clearing, Inc.; and PEAK6 Investments LLC
`(collectively, “Defendants”). (See CCAC ¶¶ 51–75).
`
` 2
`
` The Plaintiffs are Angel Guzman, Burke Minahan, Christopher Miller, and Terell Sterling (collectively,
`“Plaintiffs”). (See CCAC ¶¶ 23–41).
`
` 3
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` A “short” seller borrows a security believing the price of the security will decrease. (See CCAC ¶ 8). If
`the price of the security drops, the short seller buys the security back at a lower price and returns it to the
`lender. (See id.). Because the difference between the sell price and the buy price is the short seller’s profit,
`the short seller loses money if the price of the security increases. (See id.).
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`¶ 12). This short squeeze occurred in late January 2021, as the Retail Investors rapidly purchased
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`the Relevant Securities,4 exposing those with short positions in the Relevant Securities to “massive
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`potential losses[.]” (Id. ¶ 7 (alteration added); see id. ¶ 6). According to Plaintiffs, Defendants
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`conspired to prevent these losses by “artificially constrict[ing] the price appreciation of the
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`Relevant Securities,” in violation of the Sherman Act, 15 U.S.C. § 1. (CCAC ¶ 16 (alteration
`
`added); see id. ¶¶ 494–507).
`
`The parties.
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`The Defendants. The CCAC categorizes Defendants into three5 groups: the Clearing
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`Defendants, the Brokerage Defendants, and the Market Maker Defendants. (See id. ¶¶ 51–75).
`
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`4 The “Relevant Securities” are certain stocks the Retail Investors believed would increase in price:
`GameStop (GME), AMC Entertainment (AMC), Bed Bath & Beyond (BBBY), BlackBerry (BB), Express
`(EXPR), Koss (KOSS), Nokia (NOK), Tootsie Roll Industries (TR), and Trivago NV (TRVG). (See CCAC
`¶ 6).
`
` In the CCAC, Plaintiffs allege there was a fourth group called the Introducing Brokerage Defendants (see
`CCAC ¶¶ 42–50), but they have since voluntarily dismissed those Defendants (see [ECF No. 380] (Stash
`Financial, Inc.); [ECF No. 396] (Open to the Public Investing, Inc.); [ECF No. 397] (Ally Financial Inc.);
`[ECF No. 398] (Alpaca Securities, LLC); [ECF No. 400] (Dough LLC); [ECF No. 401] (Tastyworks, Inc.);
`[ECF No. 402] (Webull Financial LLC); [ECF No. 404] (SoFi Securities LLC)). The Court refers to this
`group as the “Introducing Brokerages.”
`
`The Introducing Brokerages provide financial trading services through an electronic trading platform. (See
`CCAC ¶¶ 42–44, 46, 47, 49, 50). During the relevant period, each Introducing Brokerage restricted and/or
`limited the ability of investors to purchase the Relevant Securities. (See id.).
`
`Because the Introducing Brokerages are only introducing brokerages — as opposed to self-clearing
`brokerages — they contract with an independent clearing firm to handle the execution and settlement of
`securities trade orders from clients or their own trading desks, rather than handle the process themselves.
`(See id. ¶¶ 105, 111). The independent clearing firm receives payments and maintains custody of the
`security. (See id. ¶ 111). At all relevant times, each Introducing Brokerage used a Clearing Defendant as
`its clearing firm. (See id. ¶¶ 42–44, 46, 47, 49, 50).
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` 5
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`2
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`The Clearing Defendants. Defendants, Apex Clearing Corporation (“Apex”) and
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`Electronic Transaction Clearing, Inc. (“ETC”), are, collectively, the “Clearing Defendants[.]”6
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`(Id. ¶¶ 66–75 (alteration added)).
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`The Clearing Defendants are independent clearing firms: they handle the back-office
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`details of securities transactions for broker-dealers, such as the Introducing Brokerages. (See id.
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`¶ 105). Independent clearing firms are supervised by the Financial Industry Regulatory Authority
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`(“FINRA”) and the Depository Trust and Clearing Corporation (“DTCC”).7 (See id. ¶¶ 96–97,
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`108, 110). Apex and ETC acted as the clearing firms for one or more of the Introducing
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`Brokerages. (See id. ¶¶ 42–44, 46, 47, 49, 50).
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`The Brokerage Defendants. Defendants, E*Trade;8 Interactive Brokers LLC; and
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`Robinhood,9 are, collectively, the “Brokerage Defendants[.]” (Id. ¶¶ 51–63 (alteration added)).
`
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`6 Apex Clearing Holdings LLC and Defendant, PEAK6 Investments LLC, are the parent corporations of
`Defendants, Apex and ETC. (See CCAC ¶¶ 67, 70).
`
` 7
`
` The DTCC is a holding company that owns and operates three clearing agencies registered with the U.S.
`Securities and Exchange Commission (“SEC”): the National Securities Clearing Corporation (“NSCC”),
`the Fixed Income Clearing Corporaton (“FICC”), and the Depository Trust Company (“DTC”). (See CCAC
`¶ 96). The NSCC is the central counterparty that clears cash transactions in the U.S. equities markets by
`netting securities deliveries and payments among NSCC’s clearing members and guaranteeing the
`completion of trades, even if one party to the transaction defaults. (See id. ¶ 98). It takes two business days
`for the NSCC to transfer the security to the buyer and the cash to the seller. (See id. ¶ 101). If a clearing
`member defaults on its settlement obligations, the NSCC guarantees the delivery of cash and securities to
`its non-defaulting members. (See id. ¶ 102).
`
`In line with the CCAC and the parties’ briefings, the Court refers to the DTCC and NSCC interchangeably.
`
` 8
`
` Defendant, E*Trade Financial Holdings, LLC (see CCAC ¶ 52), is the parent corporation of Defendant,
`E*Trade Securities LLC (see Mot. 22 n.9; Resp. 47). The Court refers to these two Defendants collectively
`as “E*Trade[.]” Doing so has no impact on the Court’s analysis.
`
`The Court uses the pagination generated by the electronic CM/ECF database, which appears in the headers
`of all court filings.
`
` 9
`
` Defendants, Robinhood Markets, Inc.; Robinhood Financial LLC; and Robinhood Securities, LLC, are,
`collectively, “Robinhood[.]” Robinhood Financial LLC and Robinhood Securities, LLC are wholly-owned
`subsidiaries of Robinhood Markets, Inc. (See CCAC ¶¶ 58, 60). Defendants dispute the inclusion of
`Robinhood as a self-clearing broker, arguing Robinhood Financial LLC is an introducing broker entity
`3
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`The Brokerage Defendants act as self-clearing brokers: they act as both an introducing
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`broker and as their own clearing firm. (See id. ¶¶ 54, 56, 63, 113). In other words, the Brokerage
`
`Defendants handle orders to buy and sell securities, as well as execute and settle orders, maintain
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`custody of securities and other assets, and maintain the paperwork associated with clearing and
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`executing a transaction. (See id. ¶ 113). Self-clearing brokers are subject to DTCC rules and
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`regulations. (See id. ¶ 116).
`
`The Market Maker Defendant.10 Defendant, Citadel Securities LLC, is the only named
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`“Market Maker Defendant[] [.]” (Id. ¶¶ 64–65 (alterations added)).
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`Citadel Securities is a market maker: it acts as a market participant by providing bid prices
`
`and ask prices for securities; maintaining an inventory of securities from its own trading; and
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`matching incoming buy and sell orders to fill those orders. (See id. ¶ 118). Relevant here, “if a
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`market maker receives an order to buy a certain security, it may route that order to an exchange or
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`it may execute the orders off-exchange in its capacity as a dealer by transacting against the buy
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`orders with contra-side sell order, either from its own inventory or by selling the security short.”
`
`(Id. ¶ 124). Citadel Securities took short positions in the Relevant Securities during the relevant
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`period. (See id. ¶ 65).
`
`Agents and co-conspirators. Defendants’ alleged acts “were authorized, ordered or
`
`performed by the Defendants’ respective officers, agents, employees, representatives, or
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`shareholders while actively engaged in the management, direction, or control of the Defendants’
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`businesses or affairs.” (Id. ¶ 76). The Defendant parent entities exercise dominance and control
`
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`separate from Robinhood Securities, LLC, the clearing entity. (See Mot. 13, 14 n.2). This distinction,
`however, has no impact on the Court’s analysis.
`
`10 Although Plaintiffs refer to “Market Maker Defendants” (see, e.g., CCAC ¶ 92), Plaintiffs name only one
`Market Maker Defendant (see id. ¶¶ 64–65).
`
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`4
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`over all their subsidiary entities; and the Defendant subsidiary entities have a unity of purpose and
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`interest with their respective parents. (See id. ¶¶ 76–78). In addition, “[e]ach Defendant acted as
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`the principal, agent, or joint venture of, or for other Defendants with respect to the acts, violations,
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`and common course of conduct alleged[.]” (Id. ¶ 80 (alterations added)). Plaintiffs allege there
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`may be various persons and/or firms that have participated as co-conspirators but are unknown at
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`this time. (See id. ¶ 79).
`
`The Plaintiffs. The named Plaintiffs are four individual investors who were subject to
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`trading limitations imposed on the Relevant Securities between January 28, 2021 and February 4,
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`2021 (the “Class Period”). (See id. ¶¶ 23–41). Each Plaintiff held shares of one or more of the
`
`Relevant Securities at the close of the stock market on January 27, 2021. (See id. ¶¶ 23, 28, 33,
`
`38). The next day, January 28, 2021, each Plaintiff was prohibited from purchasing the Relevant
`
`Securities on Robinhood’s trading platform. (See id. ¶¶ 24, 29, 34, 39).
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`That same day, Guzman and Miller applied for accounts with Charles Schwab, Fidelity,
`
`and TD Ameritrade — who were not prohibiting customers from purchasing the Relevant
`
`Securities — but were unable due to the amount of time required to set up the accounts. (See id.
`
`¶¶ 25, 35). Minahan successfully applied for an account with Fidelity and was able to purchase a
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`share of GameStop Corp. stock that day. (See id. ¶ 30). Each Plaintiff then sold his or her shares
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`of the Relevant Securities on Robinhood between January 28, 2021 and February 4, 2021. (See
`
`id. ¶¶ 26–27, 31–32, 36–37, 40–41).
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`Injury and proposed class. According to the named Plaintiffs:
`
`As a direct and intended result of Defendants [sic] contract, combination,
`agreement and restraint of trade or conspiracy, Defendants caused injury to
`Plaintiffs by restricting purchases of Relevant Securities. The Brokerage
`Defendants deactivated the buy option on their platforms and left Plaintiffs with no
`option but to sell shares of the stocks on their platforms. Plaintiffs and Class
`members, faced with an imminent decrease in the price of their positions in the
`
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`5
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`Relevant Securities due to the inability of Retail Investors to purchase shares, were
`induced to sell their shares in the Relevant Securities at a lower price than they
`otherwise would have, but for the conspiracy, combination, agreement and restraint
`of trade.
`
`(Id. ¶ 501).
`
`The named Plaintiffs seek to certify the following class:
`
`All persons or entities in the United States that held shares of stock or call options
`in GameStop Corp. (GME), AMC Entertainment Holdings Inc. (AMC), Bed Bath
`& Beyond Inc. (BBBY), BlackBerry Ltd. (BB), Express, Inc. (EXPR), Koss
`Corporation (KOSS), Nokia Corp. (NOK), Tootsie Roll Industries, Inc. (TR), or
`Trivago N.V. (TRVG) as of the close of market on January 27, 2021, and sold the
`above-listed securities from January 28, 2021 up to and including February 4, 2021
`(the “Class Period”).
`
`
`(Id. ¶ 81).
`
`
`
`
`
`The alleged facts.
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`Mechanics of securities trading. Individual investors’ market share of U.S. equity trading
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`has steadily increased since 2019 and has recently accounted for a third of all U.S. stock market
`
`trading. (See id. ¶¶ 130–31). When individual investors make investments on their own behalf,
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`they execute their personal trades through websites, apps, and trading platforms provided by
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`brokerage firms or other investment service providers. (See id. ¶ 2). After an individual investor
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`places a trade order with a brokerage firm, the brokerage sends the order to an independent clearing
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`firm for clearing services if it is only an introducing broker, or the brokerage firm performs the
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`clearing services itself if it is a self-clearing broker. (See id. ¶¶ 105, 108, 111, 129). The
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`independent clearing firm or self-clearing broker then executes the trade order itself or sends the
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`order to a market maker for execution. (See id. ¶¶ 105, 113, 122).
`
`
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`Market makers are market participants who provide bid prices and ask prices and match
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`incoming buy and sell orders to fill those orders. (See id. ¶ 118). Market makers fill these orders
`
`from their own inventory, by routing the order to an exchange, or by taking the other side of a
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`6
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`transaction (e.g., selling a security short in response to receiving an order to buy the security). (See
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`id. ¶¶ 118, 123–24). Once an order is filled, the market makers pocket the difference between the
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`bid and ask prices, which is known as the “spread.” (See id. ¶ 118). While the spreads may be
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`small, they become significant due to the large volume of orders filled. (See id.).
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`Although individual investors historically had to pay a fee or commission to their
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`brokerages for executing personal trades, today most brokerages do not charge their investors a
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`fee per transaction. (See id. ¶ 3). Instead, in exchange for routing the order to the market maker,
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`brokerages earn revenue through rebates, kickbacks, and other payments — these payments are
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`collectively known as payment for order flow. (See id. ¶¶ 3, 133–35). Clearing firms also generate
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`a significant portion of their revenue from payment for order flow. (See id. ¶ 107).
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`After an order is filled, the details of the executed order are sent to the NSCC for
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`clearinghouse and settling services. (See id. ¶¶ 101, 129). Securities trades submitted to the NSCC
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`take two days to settle — i.e., it takes two business days for the cash and the securities to be
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`electronically exchanged. (See id. ¶ 101). As stated, because there is a risk that a party to a
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`securities transaction defaults before the trade is completed, the NSCC guarantees the delivery of
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`cash and securities to its non-defaulting members. (See id. ¶ 102).
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`The NSCC collects clearing fund contributions, or margin, from clearing members at the
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`start of each day and intraday in volatile markets. (See id. ¶ 103). The margin protects the NSCC
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`and all market participants against clearing member defaults, and margin requirements must be
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`met by clearing members on a timely basis. (See id.). Margin requirements are based in part on
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`market volatility and risk. (See id. ¶ 470). The rules for calculating the contribution requirements
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`and the timing of collection of contributions are known to every clearing member; and the NSCC
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`7
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`provides reporting tools, calculators, and documentation to allow the members to monitor their
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`risk in near real-time and estimate clearing fund contribution requirements. (See id. ¶ 103).
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`January 2021 market volatility. The Retail Investors exchange investment information
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`via online discussion forums such as the WallStreetBets financial discussion forum on Reddit.
`
`(See id. ¶¶ 141, 180). WallStreetBets is characterized by a particular culture centered around
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`discussion of financial investments and memes; many of its users are sophisticated, financially
`
`savvy individual investors with business acumen. (See id. ¶ 180).
`
`Beginning in 2019, the Retail Investors, through these online discussion forums, developed
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`the hypothesis that shares of GameStop’s stock were trading at lower prices than they should have
`
`been based on GameStop’s publicly available financial disclosures and prospects. (See id. ¶ 141).
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`The Retail Investors deduced that GameStop was undervalued for a variety of reasons, including
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`because large financial institutions had taken substantial short positions in GameStop stock. (See
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`id. ¶ 142). These substantial short positions would bear significant costs if the outlook on
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`GameStop improved and the short positions had to be exited. (See id.). The Retail Investors saw
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`similar investment opportunities in the other Relevant Securities. (See id. ¶¶ 143–44).
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`Leading up to January 27, 2021, the Retail Investors, through stock brokerages, including
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`the Brokerage Defendants, purchased long positions in the Relevant Securities with the expectation
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`that the stocks would increase in value. (See id. ¶¶ 6, 91, 148). As more investors purchased the
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`Relevant Securities and “out of the money” call options11 in the Relevant Securities, the market
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`prices for the stocks rose due to supply and demand. (See id. ¶¶ 146, 162). The Relevant Securities
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`started appreciating to “unprecedented levels.” (Id. ¶ 14).
`
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`11 A call option gives the holder the right to buy the asset at a stated fixed price or the “strike price.” (See
`CCAC ¶ 166). An “out of the money” option has a strike price unfavorable in comparison to the market
`price for the underlying asset. (See id. ¶ 169).
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`8
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`To illustrate this rapid growth, a share of GameStop stock was worth $3.00 in 2019 (see
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`id. ¶ 142); $43.03 on January 21, 2021 (see id. ¶ 185); $76.79 on January 25, 2021 (see id.);
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`$147.98 on January 26, 2021 (see id. ¶ 188); and $380.00 on January 27, 2021 (see id. ¶ 190).
`
`GameStop’s stock price reached a closing high of $347.51 on January 27, 2021 — a 134.84%
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`increase from the previous day. (See id.). Other Relevant Securities experienced similar surges;
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`for example, AMC’s and Express’s share prices increased over 300% and 200%, respectively.
`
`(See id.).
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`As Retail Investors increased long positions in the Relevant Securities, those who held
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`short positions in the Relevant Securities, such as Citadel Securities (see id. ¶¶ 7, 195–96), were
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`caught in a short squeeze. (See id. ¶¶ 162–63). Investors with these short positions were faced
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`with a rapid increase in the shorted assets’ values, exposing short sellers to increased and
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`theoretically limitless losses because the short sellers must at some point buy back the stocks to
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`return them to their lenders. (See id. ¶¶ 8, 12, 163).12
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`Around 5:00 p.m. on January 27, 2021, the SEC released a statement indicating it was
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`“aware of and actively monitoring the on-going market volatility in the options and equities
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`markets,” but neither the SEC nor any other government agency issued any directive to restrict
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`trading in the Relevant Securities. (Id. ¶ 200 (quotation marks omitted)).
`
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`12 Another phenomenon known as a “Gamma squeeze” occurred as the prices of the Relevant Securities
`increased. (See CCAC ¶¶ 162, 164). Options are priced based on a variety of risk variables, including one
`called “Gamma,” which increases as the option nears its expiration date or as the option approaches its
`strike price (i.e. “being in the money”). (See id. ¶¶ 170, 172–74, 177). When a security experiences a sharp
`price increase, the Gamma increases; stated differently, options that were previously unlikely to reach their
`strike prices before expiration become more likely to. (See id. ¶ 176–78). As the Gamma increases, market
`makers hedge by purchasing more of the underlying security, which further drives the price of the security
`higher and creates a feedback loop as even deeper out of the money options approach their strike price.
`(See id. ¶ 178).
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`Events of January 28, 2021. Analytics reveal a significant volume of GameStop short
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`position transactions during after-hours trading immediately before the markets opened on January
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`28, 2021. (See id. ¶ 212). Because retail brokers do not allow individual investors to engage in
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`after-hours trading to the same extent as institutional investors, it is likely that this increase in short
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`volume was the result of institutional investors, like Citadel Securities, taking new short positions.
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`(See id. ¶ 213). Additionally, failure to delivers (“FTDs”) rose dramatically in the period leading
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`up to January 28, 2021, a phenomenon consistent with increasing short interest by market makers
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`like Citadel Securities.13 (See id. ¶ 218).
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`This increase in short positions was counterintuitive, considering chatter in various
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`financial discussion forums indicated high excitement and motivation on the part of Retail
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`Investors to continue investing in the Relevant Securities. (See id. ¶ 228). Many Retail Investors
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`had announced plans to increase long positions in the Relevant Securities on January 28, 2021.
`
`(See id.).
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`Around 1:00 a.m. EST on January 28, 2021, Robinhood informed its users that in “light of
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`unprecedented volatility surrounding [GameStop] and AMC [stock], and in an effort to help reduce
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`risk, all [GameStop] and AMC options with expirations of January 29[], 2021 [would] be set to
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`closing transactions only.” (Id. ¶ 229 (alterations added)). Customers would be able to close out
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`their positions in GameStop and AMC but could not make new investments. (See id.).
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`At 5:11 a.m. EST, Robinhood received an email from the NSCC titled “NSCC Daily
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`Margin Statement” indicating that Robinhood had a collateral requirement deficit of over $3
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`billion. (Id. ¶ 231). At 8:00 a.m. EST, Gretchen Howard, Robinhood’s COO, messaged internally
`
`
`13 An FTD occurs when one party in a trading contract, such as in a short transaction, does not deliver on
`its obligations. (See CCAC ¶ 214). FTDs are indicative of naked short selling, which occurs when a short
`seller does not actually possess the security it is supposed to borrow. (See id. ¶ 215). This practice is
`largely inaccessible to individual investors but accessible to market makers. (See id. ¶ 217).
`10
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`that Robinhood had a “major liquidity issue” and it was moving the Relevant Securities to Position
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`Close Only (“PCO”), i.e., Robinhood users could sell the Relevant Securities but could not buy
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`them. (Id. ¶ 233 (quotation marks omitted)). Shortly thereafter, in an internal Robinhood message,
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`a manager asked David Dusseault, Robinhood Financial’s President and COO, whether Robinhood
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`made AMC and GameStop stocks PCO, to which Dusseault responded: “[Robinhood Securities]
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`received a very large call — confidentially, all firms on street Jim is saying [sic] are doing [the]
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`same thing[.]” (Id. ¶ 244 (alterations added; quotation marks omitted)).
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`Robinhood moved the Relevant Securities to PCO by the time the markets opened on
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`January 28, 2021. (See id. ¶¶ 232–34). Robinhood users were no longer able to purchase the
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`Relevant Securities — the “buy” button was deactivated as a feature, leaving users with no option
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`but to sell or hold their securities. (See id. ¶¶ 235–36). On Robinhood’s web platform and mobile
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`app, users were blocked from searching for the Relevant Securities’ ticker symbols. (See id.
`
`¶ 239). Robinhood also canceled overnight purchase orders of the Relevant Securities placed on
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`January 27, 2021 and queued to move forward when the markets opened on January 28, 2021.
`
`(See id. ¶ 237).
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`Customers were not given advance notice of the restriction of the Relevant Securities to
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`PCO. (See id. ¶ 234). Robinhood announced the news on January 28, 2021 by tweeting that it
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`was restricting the Relevant Securities to PCO due to market volatility. (See id. ¶¶ 248, 251–53).
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`The other Brokerage Defendants similarly prevented the Retail Investors from opening
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`new positions in one or more of the Relevant Securities on January 28, 2021. (See id. ¶ 246).
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`Around 9:05 a.m. on January 28, 2021, Interactive Brokers announced that it placed AMC, BB,
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`EXPR, GME, and KOSS option trading into liquidation due to the “extraordinary volatility” in the
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`11
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`markets. (Id. ¶ 249). E*Trade halted GME and AMC, citing “extraordinary volumes” as the
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`reason. (Id. ¶ 250 (quotation marks omitted)).
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`While not all brokerages restricted the purchase of the Relevant Securities, the Introducing
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`Brokerages restricted trading because the Clearing Defendants raised fees to purchase the Relevant
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`Securities or otherwise instructed the brokerages not to consummate purchase orders. (See id.
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`¶¶ 270–71, 273, 278). For instance, Anthony Denier, Webull Financial’s CEO, blamed Webull’s
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`clearing firm, Apex, for its restrictions on trading in the Relevant Securities placed on January 28,
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`2021. (See id. ¶ 274). Apex informed Denier that Webull needed to shut off the ability to open
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`new positions in certain stocks after Apex learned that the DTCC was increasing the collateral
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`needed to settle trades for the Relevant Securities. (See id.). Several other Introducing Brokerages
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`also reported that Apex instructed them to halt all opening transactions of GameStop, AMC, and
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`Koss on their platforms, while ETC prohibited Alpaca from allowing its users to purchase the
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`Relevant Securities. (See id. ¶¶ 275–77). Apex cited increasing collateral requirements for the
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`restrictions it imposed on trading, including through the Introducing Brokerages. (See id. ¶ 479).
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`Altogether, numerous brokerages blocked the Retail Investors from purchasing the
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`Relevant Securities. (See id. ¶¶ 254, 269). Some restricted the Retail Investors from buying or
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`opening new long positions in securities altogether, whereas others restricted purchasing options
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`only. (See id. ¶ 269).
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`This broad prohibition on buying the Relevant Securities led to a massive sell-off, which
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`in turn resulted in a steep decline in the prices of the Relevant Securities. (See id. ¶ 255). For
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`example, on January 28, 2021, GameStop shares reached an intraday peak of $483.00 before
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`dropping down to a closing price of $193.60 — a 44.29% drop from the closing price of $347.51
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`the day before. (See id. ¶ 256). Similarly, AMC shares dropped 56.63%, EXPR shares fell
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`CASE NO. 21-2989-MDL-ALTONAGA/Torres
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`50.79%, and BBBY shares declined 36.40%. (See id.). The Retail Investors who wanted to take
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`advantage of the price drops to buy more shares of the Relevant Securities were unable to do so
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`due to the prohibition on purchasing. (See id.).
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`While individual investors were prohibited from purchasing the Relevant Securities,
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`institutional investors were not. (See id. ¶ 267). Large investment firms were able to purchase the
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`Relevant Securities at artificially reduced prices because they had access to private stock
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`exchanges known as “dark pools.”14 (See id.). Citadel Securities and other firms with short
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`positions bought the Relevant Securities at artificially reduced prices to close out their positions
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`by returning the borrowed securities they had sold short. (See id. ¶¶ 267–68).
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`Events after January 28, 2021. As the market opened on January 29, 2021, nearly all the
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`Brokerage Defendants had lifted their trading restrictions and permitted individual investors to
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`open new long positions in the Relevant Securities; even so, the Brokerage Defendants continued
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`to heavily restrict such purchases. (See id. ¶¶ 319, 321). Robinhood, for example, placed
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`limitations on the number of new positions its users could open in the Relevant Securities,
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`including by limiting purchases of GameStop stock to two shares. (See id. ¶¶ 323–24). The next
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`day, January 30, as the Relevant Securities began to regain their value, Robinhood instituted a one
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`share limit on certain Relevant Securities, including GME and AMC. (See id. ¶ 325). Robinhood
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`maintained trading limitations on certain securities through February 4, 2021. (See id. ¶ 336).
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`Restrictions like these continued to suppress the value of the Relevant Securities and pressured
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`investors to sell these stocks. (See id. ¶¶ 321, 325, 331).
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`14 Private stock exchanges are known colloquially as “dark pools” or “dark exchanges” because they do not
`disseminate public quotations of securities prices. (See CCAC ¶¶ 151–54). Through these private
`exchanges, institutional investors can discreetly buy or sell securities in large blocks, mitigating some of
`the price impacts that their buying or selling activity would otherwise have on a “lit,” or public, national
`securities exchange. (See id. ¶ 154).
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`On January 31, 2021, Vlad Tenev, Robinhood’s CEO, explained in an opinion piece
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`published in USA TODAY that Robinhood maintained trading restrictions because clearinghouse-
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`mandated deposit requirements were “increased ten-fold.” (Id. ¶ 338 (quotation marks omitted)).
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`Robinhood had announced two days earlier that it raised more than $1 billion to help meet rising
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`demands for cash and shore up its balance sheet. (See id. ¶ 336). This money raised was on top
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`of $500 million Robinhood accessed through credit lines to ensure it had the capital required to
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`allow its clients to trade the Relevant Securities. (See id.). On February 1, 2021, Robinhood
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`announced it raised an additional $2.4 billion in funding above the $1 billion it had already raised.
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`(See id.). Weeks later, while testifying before the U.S. House Committee on Financial Services,
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`Tenev testified that Robinhood met its revised deposit requirements a little after 9:00 a.m. on
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`January 28, 2021. (See id. ¶ 340).
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`Apex also initially cited increased collateral requirements as the reason for the restrictions
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`it imposed on trading, including through other Brokerage Defendants. (See id. ¶ 479). Later, on
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`February 9, 2021, Apex sent a letter to the New Jersey Office of the Attorney General, stating that
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`it imposed the restrictions due “to the potential future collateral requirement that NSCC appeared
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`it may impose on Apex[.]” (Id. ¶ 4