Robinhood mandated to pay $3.9 million settlement over blocked crypto withdrawals
Robinhood, the well-known investment platform with a crypto division, has agreed to pay a $3.9 million settlement for blocking users from withdrawing their crypto assets between 2018 and 2022. This settlement was reached with California’s Department of Justice, marking the first public legal action taken by the department against a crypto firm.
California Attorney General Rob Bonta stated that Robinhood’s actions violated the state’s commodity laws. Customers were able to purchase crypto through Robinhood, but then found themselves unable to withdraw their assets. Instead, they were forced to sell their holdings back to Robinhood to access their funds. Additionally, Robinhood misled its users, claiming they had full custody of their crypto assets when, in fact, some of those assets were held by third-party platforms. Furthermore, Robinhood had promised to connect its platform to multiple trading venues to offer competitive prices to its users, but ultimately failed to do so.
Robinhood did not contest the charges and settled with the California Department of Justice on August 31, 2024.
In a broader context, this settlement emphasizes California’s commitment to consumer and investor protection. Attorney General Bonta commented, “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.”
Robinhood’s general counsel, Lucas Moskowitz, expressed the company’s desire to move forward, 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.”
The announcement had a slight impact on Robinhood’s stock price, with shares (HOOD) closing down 1.34% to $19.11 on September 4, and a marginal 0.16% increase to $19.14 in after-hours trading. However, Robinhood’s stock has surged 54.5% so far this year, largely driven by the return of Roaring Kitty, a popular meme stock trader, after a three-year break.
Robinhood originally started as an investment firm offering easy access to the stock market via its app, but later expanded into cryptocurrency trading to meet the demands of the growing crypto market. The platform allows users to trade assets like meme coins and various altcoins.
