California Attorney General Rob Bonta announced a $3.9 million settlement with Robinhood Crypto for restricting cryptocurrency withdrawals and failing to fully disclose trading activities. The settlement marks the first public action by the California Department of Justice against a cryptocurrency company. As part of the agreement, Robinhood must allow customers to withdraw cryptocurrency to their wallets and increase transparency in its dealings with customers.
California Reaches $3.9 Million Settlement With Robinhood Crypto
California Attorney General Rob Bonta announced on Wednesday that the company has settled a $3.9 million fine with cryptocurrency trading platform Robinhood Crypto LLC “for failing to allow customers to withdraw cryptocurrency from their Robinhood accounts from 2018 to 2022 and failing to fully disclose aspects of the company’s trading and order-processing arrangements.”
The settlement is the first public action by the California Department of Justice (DOJ) against a cryptocurrency company. The action follows an investigation prompted by consumer complaints about questionable industry practices. According to Attorney General Bonta:
The agreement resolves an investigation into Robinhood’s violations of the California Commodities Act (CCL) and includes a $3.9 million fine and strict behavioral requirements.
Robinhood, known for its platform that facilitates the trading of digital currencies like bitcoin, has faced allegations of misleading customers about its business practices. An investigation by the California DOJ concluded that Robinhood “sold commodity contracts in violation of the CCL by allowing customers, who hoped their investments would soon become more valuable, to purchase cryptocurrencies without actually delivering those assets to the customers,” the notice detailed. “During that time, customers were unable to withdraw their cryptocurrencies and were forced to sell them back to Robinhood to exit the trading platform.”
The DOJ investigation further revealed:
Robinhood has misled customers by advertising that it will connect to multiple trading venues to ensure customers receive the most competitive prices across venues, but this is not always true.
Furthermore, Robinhood allegedly misrepresented that it held all of its customers’ cryptocurrency, even though it sometimes arranged for third-party trading venues to hold those assets without full disclosure. As part of the settlement, Robinhood must now allow customers to withdraw their cryptocurrency from Robinhood to their own wallets and ensure greater transparency in its dealings with customers.
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