Robinhood Markets has settled with California’s Justice Department for $3.9 million over allegations related to its crypto platform, Robinhood Crypto LLC. The settlement stems from claims that the company restricted users from withdrawing their crypto assets between 2018 and 2022. This action constitutes the first public enforcement action against a cryptocurrency firm by California’s Justice Department.
The state’s Attorney General has accused Robinhood of violating commodities laws by allowing customers to purchase cryptocurrencies without actually delivering the assets to them. Users were reportedly compelled to sell their crypto back to the platform in order to extract funds, which raised serious legal concerns. Additionally, there were claims that Robinhood misled users by stating that it held their cryptocurrencies when, in fact, some of these assets were held by external trading venues.
Further scrutiny was cast on Robinhood’s marketing practices. The company promoted itself as providing access to multiple trading venues for competitive pricing; however, this claim did not hold true in all instances. As part of the settlement, Robinhood has agreed to permit users to withdraw their crypto to personal wallets, and the company must ensure that its trading practices and communications to users are clear and adhered to.
The settlement was finalized on August 31, and Robinhood did not admit to any wrongdoing. It expressed relief at resolving the matter and emphasized its commitment to enhancing accessibility and affordability in the cryptocurrency space. Following the announcement, Robinhood’s stock experienced a minor decline on September 4, concluding the trading day at $19.11, with a slight uptick in after-hours trading. Despite this dip, the company’s stock has surged approximately 54.5% this year, benefiting from a resurgence in retail trading activity.
