Robinhood Settles for $3.9M Over Blocked Crypto Withdrawals

September 05, 2024 03:30 PM AEST | By Team Kalkine Media

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Robinhood Settles for $3.9M Over Blocked Crypto Withdrawals — Image source: shutterstock

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Robinhood Crypto LLC has agreed to a $3.9 million settlement with the California Department of Justice (DOJ) to resolve claims related to restrictions on cryptocurrency withdrawals from 2018 to 2022. This settlement, announced on September 4, represents the first public enforcement action against a cryptocurrency firm by the California DOJ.

California Attorney General Rob Bonta alleged that Robinhood {Crypto} violated state commodities laws by failing to deliver cryptocurrency assets to customers while preventing them from withdrawing their holdings from the platform. Users were reportedly forced to sell their cryptocurrency back to Robinhood to access their funds. Additionally, the Attorney General's office accused Robinhood of misleading customers by claiming it held their crypto assets, while in reality, some assets were managed by other trading venues. The platform also faced allegations of false advertising regarding its connections to multiple trading venues for competitive pricing, which was not always the case.

As part of the settlement, Robinhood did not admit or deny any wrongdoing. The agreement requires the company to permit customers to withdraw their cryptocurrency holdings to personal wallets and to provide clearer information regarding its trading, order handling, and custody practices.

Attorney General Bonta emphasized the significance of the settlement, stating it underscores the necessity for compliance with California’s consumer and investor protection laws, regardless of the type of business.

In a response, Robinhood's General Counsel Lucas Moskowitz stated that the settlement addresses historical concerns and expressed a commitment to enhancing the accessibility and affordability of cryptocurrency services.

Following the settlement, Robinhood’s stock experienced a minor decline of 1.34% to $19.11, with a slight after-hours increase to $19.14. The company’s stock has seen a notable rise of approximately 54.5% for the year, influenced in part by increased retail trading activity and the return of prominent meme stock trader Keith Gill.

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