Robinhood and California’s AG Reach $3.9M Settlement Over Failed Withdrawals

California Attorney General (AG) Rob Bunta recently announced a $3.9M settlement with Robinhood Crypto LLC. The agreement aims to resolve the meltdown following Robinhood’s failure to allow customers to withdraw their purchased crypto assets.

Relaying the latest development via a press release, the AG wrote: “The settlement resolves the investigation into Robinhood’s violation of the California Commodities Law (CCL) and includes a $3.9 million penalty and strong conduct requirements.”

Genesis of Robinhood’s Failed Withdrawals Saga

Robinhood Crypto LLC, a trading platform in the U.S., falsely advertised that it would help investors connect to multiple outlets to secure pocket-friendly prices. As expected, the advert attracted numerous investors, especially those who buy cryptocurrency assets at cost-effective prices.

However, Robinhood sold crypto assets to customers without delivering the purchased valuables. Consequently, customers had no choice but to resell their crypto to Robinhood and apply to withdraw their funds from the platform.

Unfortunately, Robinhood halted all forms of withdrawals from the platform, leaving its investors stranded. Meanwhile, the events described above happened between 2018 and 2020, underscoring the magnitude of Robinhood’s mismanagement of customers’ assets.

AG Rob Bunta Calls Out Robinhood’s Lack of Transparency

AG Rob Bunta condemned Robinhood's approach towards customer funds management and disclosed that the State had a zero-tolerance policy for cryptocurrency platforms that stepped on California's Customer and Investor Protection Laws.

“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.” Rob Bunta added in the released document.

Noteworthily, Rob's proclaimed action against Robinhood is one of the State's first significant public enforcement efforts against a cryptocurrency company. According to the settlement details, Robinhood must allow customers to withdraw their cryptocurrency assets to external wallets.

Furthermore, the platform must ensure congruence between its statements to customers and its trading practices, especially concerning orders' routing and pricing of cryptocurrency transactions.

Robinhood Reacts Via its General Counsel

Robinhood did not admit to any wrongdoing. Instead, the platform's General Counsel, Lucas Moskowitz, regarded the settlement issues as "historical practices.” Going further, he expressed satisfaction with the settlement terms.

Meanwhile, the current issue is not the first time Robinhood has faced regulatory challenges. In 2020, the company was fined $65M for misinforming unsuspecting customers about its revenue sources and causing customers not to receive the best trading prices.

Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence before making any trading or investment decisions.

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