Gairika Mitra
Robinhood Crypto LLC, the online crypto trading platform, has agreed to pay $3.9 million as settlement after being accused of misrepresenting certain aspects of its trading and order-handling processes.
This happened as a result of Robinhood’s failure to allow customers to withdraw their cryptocurrency between the period of 2018 and 2022. California Attorney General Rob Bonta announced the settlement on Wednesday, saying that it resolves a violation of the California Commodities Law (CCL) by Robinhood. The hefty financial penalty comes alongside strict new conduct requirements for the platform.
In a press release, Bonta emphasized the importance of protecting California consumers from misleading business practices, regardless of the industry.
“Whether you’re a brick-and-mortar store or a cryptocurrency company, you must adhere to California’s consumer and investor protection laws,” said Bonta. He also underscored the state’s commitment to enforcing regulations amid the rapidly advancing cryptocurrency space.
Robinhood, much like Bitcoin, is a popular platform for trading cryptocurrencies stored on a blockchain — a digital ledger managed by a network of computers. A wave of consumer complaints in the past is what led the California Department of Justice to launch an investigation into the company’s cryptocurrency trading practices.
Further inquiry also revealed that Robinhood violated the CCL by selling commodities contracts to customers. It allegedly allowed customers to purchase crypto without delivering the actual assets. During this time, it reportedly did not allow customers to withdraw their cryptocurrency holdings, and they were forced to sell them back to Robinhood to exit the platform.
Apart from this, Robinhood was found to have misled its users about how it handled their trades. While it claimed it connected to multiple trading venues to secure the best prices for customers, that was not always the case.
In fact, Robinhood argued that it would hold all customer cryptocurrencies on its platform. However, in some instances, it arranged for third-party trading venues to hold customer assets for extended periods without proper disclosure.
Apart from the $3.9 million penalty, Robinhood must now allow customers to withdraw their cryptocurrency to external wallets. It must also ensure that its representations about trading practices align with its actual operations.
Robinhood is now required to clearly disclose to customers when it holds or delays the settlement of their transactions. It must update its agreements to reflect potential delays due to security concerns.
On X, Sad Creator (@SadCreatorTalks) revealed the details of the case in great depth.
In August, Robinhood halted its 24-hour trading service. While the exact reasons for the stoppage remain vague, some people claimed it was due to “high volatility.”
Read More
- Robinhood Flashes 24-Hour Trading Halt, Faces Investor Backlash
- Shiba Inu Surges on Robinhood, Leaving Established Players in the Dust
- SEC Declares War Against Robinhood, former SEC Chief Predicts Crypto Onslaught Will Continue
Gairika holds positions in BTC. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.
