Robinhood Crypto has agreed to pay $3.9 million to end an ongoing lawsuit. California Attorney General Rob Bonta, investigating the case, found that crypto traders on Robinhood’s platform were unable to withdraw cryptocurrency from their accounts between 2018 and 2022.
In addition, users were compelled to sell back their assets to the firm if they wanted to exit the platform. Bonta stated that this act violated the state’s commodity law. The Attorney General emphasized the importance of following consumer protection laws, regardless of the business type. This settlement marks the first time the California Department of Justice (DoJ) will take public action against a cryptocurrency company.
Robinhood Charged for Promoting Misleading Advertisement
Robinhood, who received a Wells Notice from the US Securities and Exchange Commission (SEC) in May, was sued for misleading customers. Bonta’s further investigation revealed that Robinhood misled users by claiming to hold customer digital assets, while in reality, other trading platforms held the assets.
The trading platform further deceived customers by advertising connections to multiple trading venues for competitive prices, which were only sometimes accurate. Amidst all the accusations, Robinhood neither admitted nor denied wrongdoing. However, Lucas Moskowitz, Robinhood’s general counsel, mentioned that the company is ready to put all the matters behind it and forge ahead in its business operations.
In the agreement, Robinhood was mandated to allow customers to withdraw their crypto to their wallets and ensure compliance. Additionally, the trading platform must be transparent about its trading, custody practices, and potential settlement delays related to network security concerns.
Robinhood Stock Value Reacted Negatively
Upon the settlement agreement announced on September 3rd, Robinhood’s stock on Nasdaq declined 1.34%, closing at $19.11, per data from Google Finance. Speculation surrounding this price drop was linked to the 24-hour trading suspension that occurred on August 6.
HOOD has shown a 54.5% increase this year, driven by a resurgence in retail trading. Notably, the stock boost was aided by the return of the stock trader Keith Gill, who had been inactive since 2021. In 2023, the American trading platform got approval from its board of directors to buy back the $578 million stake purchased by Emergent Fidelity Technologies in May 2022.
Robinhood’s Crypto Strides
Robinhood has shown dedication to entering the world of cryptocurrency full throttle. Earlier this year, the firm announced its intention to acquire crypto exchange Bitstamp, indicating a significant move towards expanding its crypto offerings. In the following month, the firm acquired Pluto Inc., an AI-powered investment research firm, to simplify crypto operations for its users.
In the second quarter of 2024, Robinhood’s crypto transaction-based revenues soared to $81 million, a remarkable 161% increase year over year. This shift highlights Robinhood’s strong focus on crypto trading and its potential impact on the market.
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