Robinhood to Pay $3.9M in California Settlement Over Crypto Withdrawal Restriction

Crypto Reporter

Shalini Nagarajan

Crypto Reporter

Shalini Nagarajan

About Author

Shalini is a crypto reporter who provides in-depth reports on daily developments and regulatory shifts in the cryptocurrency sector.

Share

Last updated:

September 4, 2024 23:22 EDT

Why Trust Cryptonews

With over a decade of crypto coverage, Cryptonews delivers authoritative insights you can rely on. Our veteran team of journalists and analysts combines in-depth market knowledge with hands-on testing of blockchain technologies. We maintain strict editorial standards, ensuring factual accuracy and impartial reporting on both established cryptocurrencies and emerging projects. Our longstanding presence in the industry and commitment to quality journalism make Cryptonews a trusted source in the dynamic world of digital assets. Read more about Cryptonews

The California Department of Justice announced a $3.9m settlement with Robinhood on Wednesday.

This settlement resolves issues related to Robinhood’s failure to allow cryptocurrency withdrawals from 2018 to 2022. Additionally, it addresses the company’s lack of transparency in managing trades and handling orders.

Specifically, the settlement addresses Robinhood’s failure to transfer crypto to customers, forcing them to sell assets back to the platform. It also accuses Robinhood of misleading customers about crypto storage and trade execution, falsely claiming better pricing.

California’s First Major Crypto Enforcement Targets Robinhood’s Withdrawal Practices

California Attorney General Rob Bonta’s action represents one of the state’s first major public enforcements against a cryptocurrency company.

Per the settlement, Robinhood is obligated to allow customers to withdraw their crypto assets to external wallets, complying with legal standards. Additionally, the trading app must ensure its statements to customers accurately describe its trading practices, particularly regarding order routing and crypto transaction pricing.

Robinhood Hit with SEC Wells Notice After $65M Fine for Misleading Customers

Robinhood has faced similar regulatory issues in the past. In 2020, the SEC fined the company $65m for misleading customers about its revenue sources and failing to execute orders at the best prices. The SEC accused Robinhood of selling customer orders to market makers at high rates, which often prevented customers from getting the best trade prices.

Earlier this year, the SEC issued a Wells Notice to Robinhood, raising concerns about possible securities law violations in its crypto operations.

Robinhood’s CEO Vlad Tenev criticized the agency’s actions, calling them part of a broader “regulatory onslaught” against the cryptocurrency industry. He argued that these moves stifle innovation and disadvantage US companies and investors.