Robinhood Crypto, a division of the trading platform Robinhood Markets, has agreed to a $3.9 million settlement following accusations that it blocked customers from withdrawing cryptocurrency purchased on the platform.
According to Bonta’s office, Robinhood misled customers by failing to deliver the cryptocurrencies they purchased and preventing them from withdrawing their assets. As a consequence of Robinhood’s actions, customers were forced to sell their cryptocurrency holdings to exit the platform.
Bonta also said that Robinhood falsely advertised its access to multiple trading venues, which it claimed would ensure competitive pricing for customers.
“While cryptocurrency is fairly new, California has strong and enduring consumer protection laws that protect Californians against misrepresentation, including by cryptocurrency companies,” Bonta said in a statement.
“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.”
In addition to the financial penalty, Robinhood must now allow customers to withdraw their cryptocurrency to external wallets and improve transparency about its trading and order-handling practices.
In response to an inquiry from The Epoch Times, Robinhood’s general counsel Lucas Moskowitz expressed satisfaction with the resolution.
“We are pleased to put this matter behind us,” Moskowitz said in the emailed statement. “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.”
Regarding the withdrawal issue, Moskowitz said that Robinhood customers have long been able to sell their cryptocurrency and withdraw the proceeds. In April 2022, the company began allowing eligible customers to transfer their cryptocurrency to external wallets, in compliance with laws and regulations.
The $3.9 million settlement includes conduct requirements aimed at preventing future violations. These include allowing customers to withdraw their cryptocurrency holdings to external wallets and ensuring that Robinhood’s practices align with its marketing promises.
The company must also disclose any incidents where cryptocurrency settlement is delayed for more than a week, and update customer agreements to clarify its role as custodian of customer assets.
Robinhood must now route customer orders to trading venues and disclose any delays caused by security concerns.
The investigation, led by the California Department of Justice, came after complaints from users about problems withdrawing cryptocurrency from the platform.
Bonta’s office accused Robinhood of misleading customers about how their assets were stored and routed, which led to customers receiving less favorable trade execution than they had expected.
