Robinhood Settles Cryptocurrency Investigation

Robinhood’s cryptocurrency arm has settled an investigation into its past practices with a $3.9 million penalty due to failures that prevented customers from withdrawing crypto between 2018 and 2022.

In a statement released on Wednesday, California’s Department of Justice announced Attorney General Rob Bonta secured the settlement with Robinhood Crypto. The investigation revealed that customers were unable to withdraw their cryptocurrency and were instead compelled to sell it back to Robinhood to exit the trading platform.

“Robinhood misled customers by advertising it would connect to multiple trading venues to ensure customers receive the most competitive prices between the venues, which was not always true,” the California DOJ stated.

Attorney General Bonta emphasized that this investigation and settlement should act as a strong message: whether a brick-and-mortar business or a cryptocurrency company, adherence to California’s consumer and investor protection laws is mandatory.

As part of the settlement, Robinhood must:
– Ensure customers can withdraw their crypto assets and transfer them to their wallets.
– Clearly inform users that the platform will custody crypto and may delay settlements with trading venues “in the event of an incident that raises concerns about a cryptocurrency asset’s network security.”

Lucas Moskowitz, Robinhood’s general counsel, expressed via email that the company is pleased to “put this matter behind us.” He remarked that the settlement fully resolves the Attorney General’s concerns regarding historical practices and looks forward to making crypto more accessible to all.

Following the announcement, Robinhood’s stock on Nasdaq closed down 1.34% at $19.11 on Wednesday.

Robinhood appears to be investing heavily in crypto trading. In June, it announced plans to acquire the crypto exchange Bitstamp, with the deal expected to finalize in the first half of 2025.

In the second quarter of this year, Robinhood’s revenue from crypto transactions climbed to $81 million, a 161% increase year-on-year, doubling transaction revenues from equities in the same period.