The crypto arm of Robinhood Markets has reached a $3.9 million settlement with California’s Justice Department over claims it stopped allowing crypto withdrawals between 2018 and 2022.
California Attorney General Rob Bonta said on Sept. 4 that it was the first public action against a crypto company by the California Department of Justice.
Bonta had alleged Robinhood Crypto LLC violated the state’s commodities laws by allowing customers to buy crypto without delivering those assets to them and who were forced to sell their crypto to Robinhood in order for their funds to leave the platform.
Robinhood also misled its users by saying it held customer crypto when, in some cases, other trading venues held the assets, Bonta said.
He accused the trading platform of further misleading customers when it advertised that it would connect to multiple trading venues for its users to get competitive prices, which wasn’t always true.
Robinhood did not admit or deny wrongdoing in its settlement agreement dated Aug. 31.
The agreement stipulated that, in addition to the monetary penalty, Robinhood must allow customers to withdraw their crypto to their own wallets. It must also clarify its trading, order handling and custody representations to users and ensure they’re followed.
Excerpt of Robinhood Crypto LLC’s (RHC) settlement agreement. Source: California Office of the Attorney General
“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,” Bonta said.
“We are pleased to put this matter behind us,” Robinhood general counsel Lucas Moskowitz said in an emailed statement to Cointelegraph.
“The settlement fully resolves the Attorney General’s concerns related to historical practices, and we look forward to continuing to make crypto more accessible and affordable to everyone.”
Robinhood (HOOD) shares closed down 1.34% to $19.11 on Sept. 4, only seeing a slight 0.16% rise to $19.14 at the end of after-hours trading, per Google Finance.
HOOD’s price rose to nearly .60 on Sept. 4 before closing slightly down from its open. Source: Google Finance
HOOD is up around 54.5% so far this year amid a retail trading rebound, which surged amid the return of veteran meme stock trader Keith Gill earlier this year, who hadn’t publicly posted since 2021.
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