Robinhood’s crypto arm has agreed to pay $3.9 million after being accused of blocking customers from withdrawing digital assets from their accounts over a four-year period.
On Wednesday, the California Department of Justice said This is the regulator’s first public action against a cryptocurrency company as it continues to exercise its authority under the banner of “consumer protection.”
The California Department of Justice’s investigation findings revealed that Robinhood Crypto LLC allowed users, between 2018 and 2022, to purchase cryptocurrencies as commodities for the purpose of making short-term gains without delivering the actual assets.
Robinhood’s action was found to be a violation of the California Commodity Code. At the time, customers were unable to withdraw their cryptocurrencies, leaving them with no choice but to sell them back to Robinhood to get off the platform, the department said.
In addition to the financial penalty, the settlement includes several conduct requirements. settlement agreementRobinhood is expected to allow customers to withdraw cryptocurrencies to their wallets and improve transparency in trading and order processing.
The DOJ investigation also found that Robinhood misled its users by falsely advertising that it would connect to multiple trading venues to ensure competitive prices.
Robinhood did not always provide access to the best prices as promised, the department said, adding that the exchange also distorted its functions as a cryptocurrency custodian by assuring customers that it held all assets purchased on its platform when in fact it did not.
Rather, some assets were stored with third parties for extended periods without disclosure, contrary to what was reported at the time.
In addition to its settlement requirements and changes to how it handles users’ cryptocurrencies, the platform must now also disclose any settlements delayed by more than a week.
This follows another lawsuit in Washington in July, where Robinhood Financial LLC agreed to pay $9 million to resolve allegations that its “referral” program sent unwanted text messages, violating consumer protection laws.
Robinhood did not immediately respond to a request for comment.
Edited by Sebastian Sinclair
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