Robinhood has hit a $3.9 million penalty with the California Department of Justice (DOJ) concerning the various issues linked to cryptocurrency withdrawal.
The settlement concerns complaints that were made to the firm regarding Robinhood’s operations between 2018 and 2022, during which time customers were unable to withdraw their digital assets from the app.
Robinhood’s $3.9M Lesson: Crypto Withdrawals Matter!Robinhood Crypto just settled for $3.9M with California for blocking users from withdrawing their crypto between 2018-2022.California AG says Robinhood misled users on how their assets were held, forcing some to sell just to… pic.twitter.com/SUiLnjLn0Z
— IBC Group Official (@ibcgroupio) September 5, 2024
In its investigation, the California DOJ found that Robinhood’s crypto unit had some problems handling withdrawals. Customers were restricted to liquidating their digital currencies and having the funds deposited back into their Robinhood accounts; they could not withdraw them.
California’s Attorney General, Rob Bonta, said that Robinhood deceived the customers by claiming that the platform was connected with other trading platforms to give the best prices. Specifically, this claim was found to be false by the investigation, and it also leads to questions of the company’s credibility as well as customer service.
Bonta stated, “Our investigation and settlement with Robinhood should be a clear warning that whether you are a physical store or a cryptocurrency company, you have to follow the consumer and investor protection laws of California.“
Robinhood to Implement Key Changes
This means that as part of the settlement, Robinhood is expected to make the following changes in its operations: The company is now obligated to enable the customers to withdraw the cryptocurrency and transfer it to their own wallets, which was the primary reason that led to the investigation.
Also, Robinhood has to disclose to the users that it shall hold the customer’s assets and that the customer may experience late settlement of their trades in trading platforms due to security reasons.
In a statement, Robinhood’s General Counsel, Lucas Moskowitz, said that the company is pleased with the resolution of the case. In detail, Moskowitz stated in the settlement that the company has met the concerns of the Attorney General regarding the previous practices and has a plan to increase the accessibility and affordability of the cryptocurrency.
Market Impact and Future Prospects
This was especially the case with Robinhood’s stock, which responded to the news of the settlements. On Wednesday, the Nasdaq listed stock of the company was lower by 1.34% at $19.11. But Robinhood still has plans to expand in the crypto market even with the occurrences that have happened.
In June, the company revealed that it intends to acquire the crypto exchange Bitstamp in the first half of 2025. This is due to the recent business decision made by Robinhood to expand its services in the sphere of Cryptocurrency trading.
In addition, Robinhood has not been performing badly financially in the crypto market. The company’s crypto transaction-based revenues for the second quarter of this year were $81 million, up from the same period last year by 161%. This revenue growth was also at a higher level as compared to the company’s transaction revenue from equities in the same period.
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