Robinhood pays $4 million settlement over Crypto withdrawal restriction

The California Department of Justice declared a $3.9 million settlement with the company over Robinhood’s refusal to permit cryptocurrency withdrawals between 2018 and 2022, resolved by this settlement.

It also highlighted the company’s opaque order processing and trade management practices. The settlement addresses Robinhood’s inability to provide customers with cryptocurrency, forcing them to sell their assets to the platform. Additionally, it charges Robinhood with deceiving clients by making false claims about better pricing cryptocurrency storage and trade execution.

This is the state’s first significant public enforcement action against a cryptocurrency company, taken by California Attorney General Rob Bonta. The settlement mandates that Robinhood abide by legal requirements and permit users to withdraw their cryptocurrency holdings to external wallets. The trading app must guarantee that the information it provides customers about its trading practices is accurate, especially about order routing and pricing for cryptocurrency transactions.

Robinhood has previously encountered comparable regulatory challenges. The company was fined $65 million by the SEC in 2020 for failing to execute orders at the best prices and misleading customers about its revenue sources.

SEC had earlier accused the firm of frequently preventing customers from obtaining the best trade prices by selling market makers’ customer orders at exorbitant prices. The financial watchdog warned Robinhood in a Wells Notice earlier this year about potential violations of securities laws in the company’s cryptocurrency operations.

Vlad Tenev, the CEO of Robinhood, denounced the agency’s actions and said they were part of a larger “regulatory onslaught” against the cryptocurrency sector.
He contended that these actions hurt US businesses and investors and stifle innovation.