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TradeZero Halted Trading in Meme Stocks AMC, GME, KOSS. Now It Owes the SEC $100,000.

TradeZero America has settled its dispute with the U.S. Securities & Exchange Committee (SEC)
The agency accused the trading platform of misleading investors about meme stock trading halts
TradeZero denied these allegations but proposed a …

  • TradeZero America has settled its dispute with the U.S. Securities & Exchange Committee (SEC)
  • The agency accused the trading platform of misleading investors about meme stock trading halts
  • TradeZero denied these allegations but proposed a settlement of $100,000

Source: Michael Vi / Shutterstock.com

An interesting chapter in meme stock history closed today. The U.S. Securities and Exchange Commission accused commission-free trading platform TradeZero America of providing false information to investors. The allegations are that TradeZero and its CEO Daniel Pipitone falsely told investors that TradeZero never restricted the trading of meme stocks in 2021. Over a year later, civil charges have been brought against the company and settled.

Neither Pipitone nor TradeZero have admitted any wrongdoing. But the company has agreed to pay penalties of $100,000 and Pipitone will pay $25,000.

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TradeZero’s Meme Stocks Halt

The SEC alleges that the trading halt took place on Jan. 28, 2021. This date marks the height of the year’s iconic meme stock frenzy. According to regulators, TradeZero halted trading of GameStop (NYSE:GME), AMC Entertainment (NYSE:AMC) and Koss (NASDAQ:KOSS) for roughly 10 minutes, following direction from its clearing broker.

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Reuters reports that the platform “later told investors it had resisted the halts.”

In its filing, the SEC highlighted an “ask me anything” session that Pipitone conducted on Reddit in which he discussed the trading halt. Allegedly, he stated that “some trading firms are blocking these symbols is disgusting, unprecedented. … Our clearing firm tried to make us block you and we refused. After three hours on the phone they backed down.”

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However, the SEC says Pipitone “failed to disclose that TradeZero did comply with the clearing broker’s demands and shut off its customers’ ability to purchase three securities in question for a period of time.”

Investors Respond

According to Melissa Hodgman, associate director of the SEC’s enforcement division, “This case sends a powerful message that participants in our capital markets cannot exploit market turbulence to deceive customers.”

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But many investors don’t agree that the punishment fits the crime.

🚨BREAKING NEWS🚨

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The SEC has charged broker-dealer TradeZero America Inc., and its co-founder, Daniel Pipitone, with falsely stating to the firm’s customers that they didn’t restrict the customers’ purchases of meme stocks like $AMC, $GME, in 2021 when in fact they did.

— unusual_whales (@unusual_whales) May 24, 2022

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Many comments in response to a tweet from Unusual Whales make it clear that meme stock investors aren’t happy with the settlement. Some commenters have drawn comparisons between TradeZero and Robinhood (NASDAQ:HOOD). After Robinhood also halted trading in meme stocks, r/WallStreetBets members advocated for users to boycott Robinhood.

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On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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The post TradeZero Halted Trading in Meme Stocks AMC, GME, KOSS. Now It Owes the SEC $100,000. appeared first on InvestorPlace.

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