Popular trading platform Robinhood has reached a $3.9 million settlement with California’s Department of Justice following allegations that it restricted cryptocurrency withdrawals from 2018 to 2022. This marks the first legal action taken by California’s Department of Justice against a cryptocurrency company.
Attorney General Rob Bonta accused Robinhood Crypto of preventing customers from exercising full control over their digital assets. Rather than allowing users to directly withdraw their purchased cryptocurrencies, Robinhood required them to sell the assets to access their funds.
Additionally, Bonta highlighted misleading claims by Robinhood, which told customers that it was holding funds on their behalf, when, in fact, the assets were sometimes stored with other trading venues. The company’s promise of offering competitive prices across different platforms also fell short, according to the investigation.
As part of the settlement, Robinhood will now permit users to withdraw their crypto to personal wallets and improve transparency in how it handles trades and asset custody.
Although Robinhood did not admit to any wrongdoing, the company’s general counsel, Lucas Moskowitz, expressed satisfaction in resolving the issue. He emphasized Robinhood’s continued focus on making cryptocurrency more accessible to its users.
Despite the settlement news, Robinhood’s stock (HOOD) dropped 1.34% to $19.11 on September 5, though it showed slight recovery in after-hours trading.
This settlement is part of Robinhood’s ongoing efforts to rebuild its image. The return of meme stock trader Keith Gill earlier in the year helped Robinhood’s stock surge by 54.5% in 2024 so far.
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