Robinhood Crypto, a division of Robinhood Markets, has reached a $3.9 million settlement following allegations that it blocked customers from withdrawing cryptocurrency they had purchased on the platform. The settlement resolves an investigation into the company’s alleged violations of the California Commodities Law. California Attorney General Rob Bonta announced the settlement on September 4th, stating that Robinhood misled customers by not delivering the cryptocurrencies they purchased and preventing them from withdrawing their assets. This forced customers to sell their cryptocurrency holdings to exit the platform.
One of the key accusations against Robinhood was that it falsely advertised its access to multiple trading venues, which it claimed would ensure competitive pricing for customers. Bonta emphasized that cryptocurrency companies, like any other business, must adhere to California’s consumer and investor protection laws. He stated, “Whether you’re a brick-and-mortar store or a cryptocurrency company, you must adhere to California’s consumer and investor protection laws.”
As part of the settlement, Robinhood must now allow customers to withdraw their cryptocurrency to external wallets and improve transparency regarding its trading and order-handling practices. This addresses the issue that customers had faced in the past, where they were unable to withdraw their cryptocurrency assets. Robinhood’s general counsel, Lucas Moskowitz, expressed satisfaction with the resolution, stating that they were pleased to put the matter behind them. He further added that the settlement fully resolves the Attorney General’s concerns related to historical practices, and they look forward to continuing to make crypto more accessible and affordable to everyone.
Regarding the withdrawal issue, Moskowitz clarified that Robinhood customers have been able to sell their cryptocurrency and withdraw the proceeds for some time. In April 2022, the company started allowing eligible customers to transfer their cryptocurrency to external wallets, ensuring compliance with laws and regulations. This demonstrates Robinhood’s efforts to address the concerns raised by customers and regulators.
The $3.9 million settlement also includes conduct requirements aimed at preventing future violations. Robinhood must now allow customers to withdraw their cryptocurrency holdings to external wallets and ensure that its practices align with its marketing promises. The company is also obligated to disclose any incidents where cryptocurrency settlement is delayed for more than a week and update customer agreements to clarify its role as a custodian of customer assets.
The investigation into Robinhood’s actions was led by the California Department of Justice, prompted by complaints from users who experienced difficulties withdrawing their cryptocurrency from the platform. The Attorney General’s office accused Robinhood of misleading customers about how their assets were stored and routed, resulting in less favorable trade execution than expected.
This settlement serves as a reminder that even in the relatively new world of cryptocurrency, consumer protection laws are in place to safeguard individuals. Companies operating in the crypto space must adhere to these laws and ensure transparency and fair treatment of customers. The actions taken by the California Department of Justice and the subsequent settlement with Robinhood send a strong message to other cryptocurrency companies that they will be held accountable for any violations. It highlights the importance of regulation and oversight in protecting consumers in this rapidly evolving industry.
