- Meme stock investor Ryan Cohen will have to face a lawsuit from Bed Bath & Beyond shareholders.
- Investors claimed Cohen's use of the smiling moon emoji constituted securities fraud.
Ryan Cohen will have to face a securities fraud lawsuit from Bed Bath & Beyond shareholders, as the meme-stock hero's use of a single emoji could hold him liable for securities fraud, a federal judge ruled last week.
Shareholders filed a suit against Cohen after the Gamestop executive chairman sold his shares of Bed Bath & Beyond during a rally for the meme stock last year, bagging a $68 million profit before the stock price tanked again.
A week before selling his shares, Cohen responded to a CNBC story of Bed Bath & Beyond that had a picture of a woman pushing a shopping cart at the store, tweeting, "At least her cart is full," followed by a smiling moon emoji.
"In the meme stock 'subculture,' moon emojis are associated with the phrase 'to the moon,' which investors use to indicate that a stock will rise,'" Washington DC district judge Trevor McFadden said in a ruling last Thursday. "So meme stock investors conceivably understood Cohen's tweet to mean that Cohen was confident in Bed Bath and that he was encouraging them to act."
Cohen had attempted to the dismiss the lawsuit, but emojis are liable to the same degree as words if they express the same ideas, the ruling said.
"A fraudster may not escape liability simply because he used an emoji," McFadden added.
The lead attorney representing Cohen's venture capital firm in the case did not respond to Insider's request for comment.
Cohen purchased the shares of the now-bankrupt retailer when the price of the stock was in the range of $13-$17, according to Securities and Exchange Commission filings, and sold his entire stake when the stock price jumped to $30 in August. Shortly after Cohen's sale, the stock plummeted to just $0.30 per share.
Bed Bath & Beyond shares traded at $0.29 on Monday, down 99% from their record price of $80.48 a share.
Cohen said he sold the stock because his "views of the business clearly changed," but the iconic home goods retailer has been struggling for years, and faced poor prognosis from Wall Street analysts. The company filed for bankruptcy in April of this year after several last-ditch attempts to raise more cash and turn the business around.