Robinhood’s cryptocurrency division has agreed to pay a $3.9 million settlement following a legal dispute with California’s Department of Justice (DOJ).
The case revolved around accusations that the platform blocked users from withdrawing crypto from 2018 to 2022.
A press release published on September 4 revealed that this was the DOJ’s first action targeting a cryptocurrency company.
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California Attorney General Rob Bonta stated that Robinhood Crypto LLC violated state commodity laws by selling crypto contracts without delivering the actual assets to customers. Investors were unable to withdraw their cryptocurrencies and had to sell them back to Robinhood to leave the platform.
The investigation further found that Robinhood falsely claimed to hold customer assets when, in fact, they were sometimes managed by third-party trading platforms. Additionally, the company misled customers with false promises about connecting to various trading venues for better prices.
Robinhood neither admitted nor denied any wrongdoing in the settlement, finalized on August 31.
The terms of the settlement include not just the financial penalty but also reforms to Robinhood’s operations. The company must now ensure users can withdraw their crypto holdings to external wallets, clarify how it handles trades and orders, and be transparent about who is responsible for storing customer assets.
Bonta remarked:
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.
With this settlement, Robinhood seeks to move past the allegations, while regulators continue to focus on ensuring transparency and consumer protection within the crypto industry.
Robinhood was also recently targeted by the US Securities and Exchange Commission (SEC), receiving a Wells notice due to suspected securities violations.
Gode is a Web3 Market Analyst who researches the most important industry events and interprets how they affect the wider Web3 space. Her formal education in media culture & digital rhetoric allows her to employ a methodical approach to evaluating critical Web3 news data, including large-scale events and the wider social sentiment within the ecosystem.
Gode is a mutilingual professional, having studied in multiple universities all across Europe. This allows her to have a one-of-a-kind opportunity to analyze Web3 social sentiments spanning different cultures and languages and, in turn, develop a much deeper understanding of how the Web3 space is growing within different communities. With the rest of her team, Gode works to identify crucial crypto news patterns and provide unbiased and data-driven information.
Gode’s passions include working and communicating with people, and when she’s not researching Web3 news, she spends her time traveling and watching true crime documentaries.
