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Robinhood’s crypto division has agreed to pay a $3.9 million fine, settling a California investigation into its past practices, according to a Sept. 5 statement.
California Attorney General Rob Bonta said the settlement was secured after Robinhood Crypto prevented users from withdrawing their digital assets from 2018 to 2022. The company also failed to disclose details about its trading and order-handling processes fully.
Settlement details
The investigation found that Robinhood misled customers by claiming it would connect to multiple trading venues to offer the best prices, which wasn’t always the case.
Additionally, the company assured users that it held all purchased cryptocurrencies on their behalf. Robinhood sometimes arranged for trading venues to keep customer assets for extended periods without informing users.
Bonta emphasized that despite crypto being a relatively new industry, California’s consumer protection laws apply to all businesses, including crypto 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.”
Robinhood did not admit or deny any wrongdoing. However, as part of the settlement, users must be allowed to withdraw their digital assets, and it must be made clear that, in some instances, the platform will hold assets longer due to concerns about network security.
SEC scrutiny
This settlement comes as the firm continues to face a separate investigation by the US Securities and Exchange Commission (SEC). In May, the SEC informed Robinhood of plans to file a lawsuit alleging violations of federal securities laws.
Robinhood, however, plans to challenge the SEC’s claims. The company said it would demonstrate the legal and factual weaknesses in the financial regulator’s case, arguing that the assets listed on its platform are not securities.
