California Attorney General fines Robinhood Crypto LLC $3.9 million

California Attorney General Rob Bonta has announced a $3.9 million fine against Robinhood Crypto LLC for violating state law on commodity contracts. During the period from 2018 to 2022, the company prohibited customers from withdrawing cryptocurrency from their accounts.

According to the requirements of regulators, Robinhood is obliged to provide customers with the opportunity to withdraw cryptocurrency to their wallets, as well as improve the process of providing information about their trading and custody operations.

Investigation details

The California Department of Justice found that Robinhood sold commodity contracts in violation of the law, allowing customers to buy cryptocurrency without actually transferring assets. Clients could not withdraw their funds and were forced to sell cryptocurrency back to the platform to close their positions.

Consumer protection

The attorney general emphasized that any business, including cryptocurrency companies, must comply with state laws to protect consumer and investor rights.

The investigation also showed that Robinhood misled customers by claiming to be connected to several trading platforms to ensure competitive prices. The company also failed to disclose information about arrangements for the long-term storage of customer assets on trading platforms.

This settlement coincides with a separate investigation by the U.S. Securities and Exchange Commission, which in May announced that it was preparing a lawsuit over alleged violations of federal securities laws.