Robinhood Settles $3.9 Million Fine to Resolve California Crypto Investigation
By: Isha Das
Robinhood's crypto division has agreed to pay a $3.9 million fine to settle an investigation by the state of California into its past practices. The settlement, announced on September 5, concludes a probe by the California Attorney General's office that revealed the company had prevented users from withdrawing their digital assets between 2018 and 2022. Additionally, the company failed to fully disclose vital details about its trading and order-handling processes.
According to California Attorney General Rob Bonta, the investigation uncovered that Robinhood had misled customers by falsely claiming that it connected to multiple trading venues to secure the best prices. In many instances, this was not the case. Moreover, while the company assured users that it held all purchased cryptocurrencies on their behalf, it sometimes arranged for trading venues to keep customer assets for extended periods without informing them.
Bonta emphasized that California's consumer protection laws apply to all businesses, including cryptocurrency firms. He stated, "Our investigation and settlement with Robinhood should send a strong message: whether you're a brick-and-mortar store or a cryptocurrency company, you must adhere to California's consumer and investor protection laws." Notably, Robinhood has neither admitted nor denied any wrongdoing as part of the settlement. However, the company is now obligated to allow users to withdraw their digital assets and must make it clear that assets may sometimes be held longer due to network security concerns.
This settlement comes amid ongoing scrutiny from the U.S. Securities and Exchange Commission (SEC). In May, the SEC informed Robinhood of its intent to file a lawsuit alleging violations of federal securities laws. Robinhood plans to contest the SEC's claims, arguing that the assets on its platform are not securities. The company aims to demonstrate the legal and factual weaknesses in the financial regulator's case.
