- Robinhood Crypto settles with California Justice Department for $3.9 million over restricting crypto withdrawals from 2018 to 2022.
- Settlement requires Robinhood to allow direct crypto withdrawals and clarifies its custody and trading practices.
- This marks the first public action against a crypto firm by California’s Department of Justice, highlighting strict compliance expectations.
Robinhood Crypto, the cryptocurrency division of Robinhood Markets, has agreed to pay $3.9 million to settle allegations with the California Department of Justice. The settlement, announced on September 4 by Attorney General Rob Bonta, addresses complaints that Robinhood restricted user withdrawals of cryptocurrencies over four years.
Allegations and Settlement Details
The investigation led by Attorney General Bonta concluded that from 2018 to 2022, Robinhood Crypto did not permit customers to transfer their cryptocurrency to external wallets, compelling them to liquidate their holdings if they wished to withdraw funds. The practice was found to contravene California’s commodities laws, which mandate that purchased assets should be deliverable to the purchaser.
Moreover, the trading platform was accused of providing misleading information regarding the custody of these assets and its pricing structure. Allegedly, Robinhood claimed it held customer cryptocurrencies directly and promised optimal trading prices by connecting to multiple trading venues—a claim found to be occasionally inaccurate.
Ensuring Compliance and Transparency
Under the terms of the settlement dated August 31, which Robinhood has agreed to without admitting any wrongdoing, the company must implement significant changes. These include enabling customers to transfer cryptocurrencies to personal wallets and revising its communications about how it handles trading orders and maintains custody of assets.
Attorney General Bonta emphasized the importance of adherence to state laws, stating, “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.”
Company’s Response and Market Reaction
In response to the settlement, Robinhood’s general counsel, Lucas Moskowitz, expressed relief at resolving the issues raised by the Attorney General, remarking that the company is eager to continue making cryptocurrency trading more accessible and affordable.
Despite the settlement, Robinhood’s stock experienced a slight dip, closing down 1.34% on the day of the announcement, though it slightly recovered in after-hours trading. This financial year, however, Robinhood’s shares have seen a significant rise, buoyed by a resurgence in retail trading activity driven by prominent traders like Keith Gill, marking a notable recovery since his last public activity in 2021.
