Cryptocurrency buying and selling platform Robinhood has agreed to pay as much as $3.9 million in settlement charges following complaints filed by prospects a number of years in the past. The penalties additionally embrace new, stricter conduct necessities.
The investigation into Robinhood was prompted by shopper grievances associated to questionable practices inside its cryptocurrency division.
Robinhood to Pay $3.9 Million to Clients
California Legal professional Common Rob Bonta introduced in a Wednesday press launch that Robinhood can pay penalties for denying prospects entry to their cryptocurrency holdings between 2018 and 2022. The platform additionally did not disclose key particulars relating to its buying and selling and order-handling practices.
Bonta revealed that Robinhood violated the California Commodities Regulation (CCL) by promoting commodities contracts. The corporate allowed customers to purchase cryptocurrency with the expectation of worth progress however did not ship the belongings. In consequence, prospects had been pressured to promote their holdings again to Robinhood once they couldn’t entry their investments.
“Robinhood misled customers by advertising it would connect to multiple trading venues, to ensure customers receive the most competitive prices between the venues, which was not always true. Robinhood also represented to its customers that Robinhood itself held all its customers’ cryptocurrencies purchased through Robinhood’s platform. Despite these assurances, Robinhood did not tell customers that there were instances in which it arranged for trading venues to hold customer assets for extended periods,” the California AG wrote.
Learn extra: Easy methods to Purchase and Promote Crypto on Robinhood: A Step-by-Step Information
The Wednesday settlement formally closes the investigation into Robinhood’s violations of the California Commodities Regulation (CCL). Bonta cited the state’s shopper safety legal guidelines, which safeguard residents in opposition to misrepresentation, together with by cryptocurrency corporations. The settlement additionally consists of stringent conduct necessities for the platform transferring ahead.
Moreover, the US Securities and Alternate Fee (SEC) investigated Robinhood’s cryptocurrency operations, issuing a Wells Discover signaling potential enforcement actions. Whereas the corporate expressed disappointment, with Chief Authorized Officer Dan Gallagher referencing their prior good religion efforts, Robinhood has made strides towards compliance, together with making use of to register as a special-purpose broker-dealer beneath SEC laws.
Platform Thrives Regardless of Regulator Woes
Regardless of ongoing authorized challenges, Robinhood stays on a optimistic trajectory following robust second-quarter (Q2) earnings. In early August, BeInCrypto reported that the platform’s Q2 revenues climbed to $682 million, marking a 40% year-over-year improve, pushed largely by crypto and choices buying and selling.
Notably, crypto revenues skyrocketed by 161% year-over-year, reaching $81 million in Q2 2024. Whereas the corporate noticed a ten% sequential improve in total internet revenues from $618 million in Q1 to $682 million in Q2, crypto transaction-based income barely declined, dropping from $126 million in Q1 to $81 million in Q2.
An important issue behind Robinhood’s current success is its strategic acquisitions and initiatives. In June, the platform acquired European crypto change Bitstamp, Ltd., adopted by the July buy of AI-powered funding analysis platform Pluto Capital Inc. In line with Jason Warnick, Robinhood’s Chief Monetary Officer, these acquisitions are a part of a broader plan to gasoline progress.
Learn extra: Coinbase vs. Robinhood: Which Is the Finest Crypto Platform?
Nevertheless, following information of the $3.9 million penalty, Robinhood’s inventory (HOOD) dropped 1.34%, buying and selling at $19.11 as of two:30 a.m. ET.
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