The California Department of Justice recently announced a $3.9 million settlement with Robinhood regarding issues related to the platform’s failure to allow cryptocurrency withdrawals between 2018 and 2022. The settlement also addresses Robinhood’s lack of transparency in managing trades and handling orders. Specifically, it focuses on Robinhood’s failure to transfer crypto to customers, forcing them to sell their assets back to the platform. Additionally, the platform was accused of misleading customers about crypto storage and trade execution, falsely claiming better pricing. This settlement represents one of California’s first major public enforcements against a cryptocurrency company.
California Attorney General Rob Bonta’s actions require Robinhood to allow customers to withdraw their crypto assets to external wallets, ensuring compliance with legal standards. Additionally, the trading app must accurately describe its trading practices to customers, particularly regarding order routing and crypto transaction pricing. This enforcement effort aims to hold Robinhood accountable for its past practices and improve transparency for its customers.
This is not the first time Robinhood has faced regulatory issues. In 2020, the Securities and Exchange Commission (SEC) fined the company $65 million for misleading customers about its revenue sources and failure to execute orders at the best prices. The SEC accused Robinhood of selling customer orders to market makers at high rates, leading to customers not receiving the best trade prices. Additionally, earlier this year, the SEC issued a Wells Notice to Robinhood, raising concerns about possible securities law violations in its crypto operations. These regulatory challenges have put Robinhood under scrutiny and raised questions about its business practices.
Robinhood’s CEO, Vlad Tenev, has criticized the regulatory actions taken against the platform, referring to them as part of a broader “regulatory onslaught” against the cryptocurrency industry. Tenev argues that these moves inhibit innovation and disadvantage US companies and investors operating in the crypto space. Despite facing regulatory scrutiny, Robinhood continues to be a popular platform for retail investors looking to trade cryptocurrencies and traditional assets. The platform’s settlement with the California Department of Justice is a significant step towards addressing past issues and improving accountability within the industry.
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