California Attorney General Rob Bonta announced a $3.9 million settlement with Robinhood Crypto, LLC over violations of the California Commodities Law (CCL). The settlement comes after an investigation revealed that Robinhood failed to allow customers to withdraw cryptocurrency from their accounts and misled customers about its trading practices between 2018 and 2022.
The settlement includes the financial penalty and imposes strict conduct requirements on the company. Robinhood must now permit customers to withdraw their cryptocurrency and ensure transparency in its trading and order-handling practices.
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Investigation Reveals Trading Misconduct
The California Department of Justice opened an investigation into the allegations of its client base concerning the application of Robinhood’s trading platform. Consequently, as stated by the investigation, Robinhood was engaged in selling commodities contracts in violation of CCL, whereby they allowed customers to purchase cryptocurrencies but did not deliver the assets. At this time, clients had limited or no ways of cashing out their digital currency and were forced to trade it back to Robinhood to leave the app.
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Also, Robinhood misled its customers by stating that it would be linked to several trading sites to get the best prices, but this was not the case most of the time. Robinhood also assured customers that it held all their cryptocurrency but failed to disclose that third-party trading venues held some assets for extended periods.
Settlement and Compliance Measures
According to the settlement, Robinhood must take numerous steps to protect its consumers. The firm must accept cryptocurrency withdrawals, be transparent about its trading procedures, and disclose any transaction settlement delays caused by concerns about a cryptocurrency asset’s network security. Furthermore, any delay in settlement lasting more than one week must be noted by the California Attorney General’s Office.
In conclusion, this settlement demonstrates California’s commitment to enforcing consumer protection laws, even in the evolving digital currency space. The settlement with Robinhood sends a clear message that all companies, including those dealing with cryptocurrency, must adhere to state laws and ensure customer transparency.
Also Read: Over $26 Million Dogecoin Transferred From Robinhood
Maxwell Mutuma
Maxwell is a crypto-economic analyst and Blockchain enthusiast, passionate about helping people understand the potential of decentralized technology. He writes extensively on topics such as blockchain, cryptocurrency, tokens, and more for top publications such as Coingape, Coin Edition, and The Coin Republic. His goal is to spread knowledge about this revolutionary technology and its implications for economic freedom and social good.