Robinhood’s crypto division to pay $3.9M settlement over halt on withdrawals

• Settlement related to charges associated with violations of commodities laws
• Robinhood’s crypto arm is just the latest crypto-entity to fall victim to regulatory enforcement

Robinhood Markets’ crypto division, Robinhood Crypto LLC, is in the news today after it settled with California’s Justice Department for $3.9 million. This settlement was over claims it halted crypto withdrawals between 2018 and 2022. The settlement, reached without the company admitting or denying wrongdoing, came after Attorney General Rob Bonta accused the company of breaking commodities laws.

Robinhood must now ensure it does not impede crypto withdrawals and must maintain transparency regarding its custody practices.

Details of these charges

When it filed these charges, the state’s Justice Department claimed that Robinhood Crypto LLC failed to delivery crypto assets to customers who had bought them. Similarly, Bonta’s legal team accused the platform of allowing customers to sell their cryptos to Robinhood in an attempt to get their funds released.

Attorney General Bonta emphasized that Robinhood’s alleged misconduct violated California’s consumer protection laws, putting many of the state’s investors at risk. He added,

“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. I am dedicated to using all the tools available to my office to protect California consumers in the face of advancing technology in the marketplace.”

For its part, a representative from Robinhood claimed that it is glad to put the matter behind them. In fact, according to the firm’s general counsel, the settlement has also resolved the AG’s concerns about the firm’s “historical practices.”

Not just Robinhood

This settlement highlights the increasing regulatory pressure on crypto companies in the U.S. to comply with legal standards and safeguard consumer interests. Notably, similar regulatory actions have recently targeted major players like Kraken and Coinbase, reinforcing the trend of heightened enforcement in the crypto sector.

Kraken, for instance, was fined $30 million by the SEC for offering unregistered staking services, while Coinbase faced scrutiny for allegedly listing unregistered securities.

The settlement with Robinhood comes as the latest development in a series of crackdowns aimed at ensuring that companies within the crypto ecosystem adhere to regulatory frameworks designed to protect consumers and uphold market integrity. The case highlights the need for crypto platforms to provide clear, compliant services and transparent communication with their customers, particularly regarding asset custody and withdrawal policies.