Robinhood To Settle $3.9M for Stopping Customer Crypto Withdrawals

Key Takeaways

• Robinhood’s crypto arm was fined $3.9 million in a settlement with the California Department of Justice.
• Robinhood blocked users from making crypto withdrawals between 2018 and 2022.
• The trading firm did not admit or deny any wrongdoing in its settlement.

The crypto-trading subsidiary of Robinhood Markets reached a $3.9 million settlement with the California Department of Justice (DOJ) over claims that it blocked users from making crypto withdrawals between 2018 and 2022.

The  “historical practices,” as described by Robinhood’s chief lawyer, earned the stock and investment platform the first public action against a crypto company by California’s DOJ.

Robinhood Violated California Law

The settlement came after Attorney General Rob Bonta alleged that Robinhood Crypto violated the California Commodities Law (CCL) by allowing users to purchase crypto they could not access. 

Bonta also alleged that users were forced to sell their crypto on the Robinhood platform to free their funds. 

The attorney general said that the platform also misled users by allowing other trading venues to hold users’ assets in some cases after stating that all customer crypto assets were held on the platform. 

California DOJ Settlement Should ‘Send a Strong Message’

In addition to the $3.9 million penalty, Robinhood also agreed to allow customers to withdraw crypto into their own wallets. The trading platform must also be transparent with its trading and order handling. 

“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  in a statement.  

Robinhood did not admit or deny any wrongdoing in its settlement.

Robinhood’s Tumultuous Relationship With the SEC

In May, Robinhood warned of an impending lawsuit from the Securities and Exchange Commission (SEC) over its cryptocurrency business, marking the latest chapter in the regulator’s crackdown on digital assets. 

The firm confirmed that its crypto arm had received a Wells notice, something crypto companies seem to be receiving increasingly regularly. 

A Wells notice is a communication informing a company that an agency, such as the SEC, plans to bring an enforcement action against them. The notice outlines the charges the agency intends to file and allows the recipient to respond before any formal legal action is taken.

“After years of good faith attempts to work with the SEC for regulatory clarity, including our well-known attempt to ‘come in and register,’ we are disappointed that the agency has decided to issue a Wells notice related to our US crypto business,” said Dan Gallagher, Robinhood’s chief legal, compliance and corporate affairs officer.

About the Author

Kurt Robson

Kurt Robson is a London-based reporter at CCN with a diverse background across several prominent news outlets. Having transitioned into the world of technology journalism several years ago, Kurt has developed a keen fascination with all things AI. Kurt’s reporting blends a passion for innovation with a commitment to delivering insightful, accurate and engaging stories on the cutting edge of technology.

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