Robinhood Crypto LLC has agreed to pay $3.9 million to resolve allegations that it prevented customers from withdrawing their cryptocurrency holdings between 2018 and 2022. The settlement was reached with the California Department of Justice, marking the state’s first public action against a crypto company.
Allegations of Misleading Practices
According to California Attorney General Rob Bonta, Robinhood Crypto violated state commodities laws by allowing users to purchase cryptocurrencies without delivering the assets to them. Many customers were reportedly forced to sell their crypto back to Robinhood in order to access their funds. Additionally, Robinhood was accused of misleading customers by claiming that it held their cryptocurrency, while in some cases, other trading platforms were holding the assets.
Further accusations against the trading platform included misleading claims about offering competitive prices. Robinhood allegedly advertised that it would connect to multiple trading venues for price comparison, but this was not always the case.
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Settlement Terms and Conditions
While Robinhood did not admit or deny the allegations in the settlement, the agreement, finalized on August 31, requires the company to make several changes. Along with paying the $3.9 million fine, Robinhood must allow customers to withdraw their cryptocurrency into their own wallets. The company is also required to provide more transparency in how it handles trading, order processing, and custody of assets to ensure compliance moving forward.
Robinhood’s general counsel, Lucas Moskowitz, expressed satisfaction with the resolution, stating that the settlement addresses the Attorney General’s concerns related to past practices. He emphasized the company’s commitment to making cryptocurrency more accessible and affordable for its users.
On September 4, Robinhood’s stock (HOOD) closed at $19.11, a 1.34% drop following the settlement announcement. After-hours trading saw a modest 0.16% increase, bringing the stock to $19.14, according to Google Finance.
