Crypto trading platform Robinhood has agreed to pay a $3.9 million fine as part of a settlement related to complaints filed several years ago by its customers. The penalty also comes with stricter behavioral requirements for the company going forward.
The investigation into Robinhood was sparked by consumer complaints about questionable practices within their crypto division.
Robinhood Mandatory Paying Rp6 T to Customers
California Attorney General Rob Bonta announced in a press release on Wednesday (4/9) that Robinhood would pay a fine for its actions in restricting customers' access to its crypto assets between 2018 and 2022. In addition, Robinhood failed to provide important details regarding its trading practices and order handling.
Bonta said Robinhood violated the California Commodities Law (CCL) by selling commodity contracts. The company allowed users to buy crypto in the hope that it would increase in value, but failed to deliver the assets. As a result, customers were forced to sell their assets back to Robinhood because they could not access their investments.
âRobinhood misled customers by advertising that it would connect with multiple trading platforms to ensure customers received the most competitive pricing across platforms, but this was not always the case. Robinhood also claimed that it held all of customersâ crypto purchased through its platform. However, in some cases, Robinhood actually arranged for other trading platforms to hold customersâ assets for longer periods of time,â the California Attorney General wrote.
Wednesdayâs settlement officially closes the investigation into Robinhoodâs violations of the California Commodities Law (CCL). Bonta was referring to the stateâs consumer protection law, which protects citizens from misrepresentation, including by crypto companies. The resolution also includes strict behavioral requirements for the platform going forward.
In addition, the U.S. Securities and Exchange Commission (SEC) is also investigating Robinhoodâs crypto operations, issuing a Wells Notice signaling potential legal action. While the company is disappointed, Robinhoodâs Chief Legal Officer, Dan Gallagher, emphasized their previous good-faith efforts. Robinhood has taken steps toward compliance, including filing for SEC-regulated special-purpose broker-dealer registration.
Robinhood Remains Successful Despite Regulatory Issues
Despite its ongoing legal issues, Robinhood remains on a positive track after posting solid second-quarter (Q2) revenue. In early August, BeInCrypto reported that Robinhoodâs Q2 revenue reached $682 million, representing a 40% year-over-year jump. The gains were driven largely by crypto and options trading.
Crypto revenue surged 161% YoY, reaching US$81 million in Q2 2024. While there was a 10% jump in total net revenue from US$618 million in Q1 to US$682 million in Q2, crypto transaction revenue dipped slightly, dropping from US$126 million in Q1 to just US$81 million in Q2.
Robinhoodâs recent success has been fueled by a smart acquisition strategy. In June, Robinhood acquired European crypto exchange Bitstamp, Ltd., followed by the purchase of AI-based investment research platform Pluto Capital Inc. in July. According to Robinhoodâs Chief Financial Officer Jason Warnick, the acquisitions are part of a larger plan to accelerate growth.
However, following news of the US$3.9 million fine, Robinhood's ( HOOD ) stock price fell 1.34% and is now trading at US$19.11 at 2:30 am ET.
