Robinhood’s crypto division has agreed to pay a $3.9 million fine, settling a California investigation into its past practices, according to a Sept. 5 statement.
California Attorney General Rob Bonta said the settlement was secured after Robinhood Crypto blocked users from withdrawing their digital assets from 2018 to 2022. The company has also not fully disclosed details of its trading and order fulfillment processes.
Settlement details
The investigation found that Robinhood misled customers by claiming it would connect to multiple trading platforms to provide the best prices, which was not always the case.
Furthermore, the company assured users that it held all purchased cryptocurrencies on their behalf. Robinhood sometimes allowed trading platforms to hold customers’ assets for extended periods without notifying users.
Bonta emphasized that even though crypto is a relatively new industry, California consumer protection laws apply to all businesses, including crypto companies. He stated:
“Our investigation and settlement with Robinhood should send a strong message: Whether you are a brick-and-mortar store or a cryptocurrency company, you must comply with California’s consumer and investor protection laws.”
Robinhood has not admitted or denied any wrongdoing. However, as part of the settlement, users must be allowed to withdraw their digital assets, and it must be made clear that in some cases the platform will hold assets longer due to network security concerns.
SEC investigation
This settlement comes as the company continues to face a separate investigation by the U.S. Securities and Exchange Commission (SEC). In May, the SEC informed Robinhood of plans to file a lawsuit alleging violations of the federal securities laws.
However, Robinhood plans to challenge the SEC’s claims. The company said it would demonstrate legal and factual weaknesses in the financial regulator’s case, arguing that the assets listed on its platform are not securities.