Robinhood Markets’ cryptocurrency division has agreed to a $3.9 million settlement with the California Justice Department following accusations of restricting crypto withdrawals from 2018 to 2022.
California Attorney General Rob Bonta announced the settlement on September 4, marking it as the first public action by the California Department of Justice against a cryptocurrency company. Bonta alleged that Robinhood Crypto LLC breached state commodities laws by allowing customers to purchase cryptocurrencies without actually delivering the assets. Instead, customers were compelled to sell their holdings back to Robinhood to withdraw their funds.
Additionally, Bonta criticized Robinhood for inaccurately informing its customers that it held their crypto assets directly, when in fact, these were often held at other trading venues. He also pointed out that Robinhood falsely advertised connecting to multiple trading venues to secure competitive prices for its users, which was not consistently the case.
The settlement, formalized on August 31, does not involve an admission of guilt or denial of wrongdoing by Robinhood. However, it includes significant corrective measures. Robinhood is now required to enable direct crypto withdrawals to customer wallets and must make its trading, order handling, and custody processes transparent and compliant with the stipulated guidelines.
“Our investigation and settlement with Robinhood should send a strong message: Whether you’re a brick-and-mortar store or a cryptocurrency company, you must adhere to California’s consumer and investor protection laws,” Bonta stated, emphasizing the broader implications for industry compliance.
Robinhood’s general counsel, Lucas Moskowitz, responded to the settlement by stating, “We are pleased to put this matter behind us. The settlement fully resolves the Attorney General’s concerns related to historical practices, and we look forward to continuing to make crypto more accessible and affordable to everyone.”
Following the announcement, Robinhood (HOOD) shares experienced a minor downturn, closing down 1.34% at $19.11 on September 4, with a slight recovery in after-hours trading to $19.14, as reported by Google Finance.
