Robinhood Markets’ crypto division has reached a $3.9 million settlement with the California Department of Justice. This resolves allegations that the company blocked crypto withdrawals for its users between 2018 and 2022.
On September 4, California Attorney General Rob Bonta announced this as the state’s first public action against a cryptocurrency company. The case revolved around claims that Robinhood Crypto LLC violated California’s commodities laws.
Issues with Crypto Withdrawals on Robinhood
Bonta accused Robinhood of allowing customers to buy crypto without actually delivering the assets to them. If users wanted to withdraw their funds, they had to sell their crypto back to Robinhood. This, according to the Attorney General, forced users to keep their funds on the platform longer than necessary.
Robinhood was also accused of misleading its users. The platform claimed it held customer crypto, but in some cases, those assets were held by other trading platforms. Additionally, Robinhood advertised that it connected to multiple trading venues to get the best prices for its users, which wasn’t always true.
Robinhood did not admit or deny any wrongdoing as part of the settlement, which was finalized on August 31. In addition to the $3.9 million penalty, Robinhood must now allow users to withdraw their crypto to their own wallets. The company is also required to be more transparent about how it handles trades, orders, and crypto custody.
Strong Message from California
“This settlement should send a clear message: whether you’re a traditional business or a crypto company, you must follow California’s consumer and investor protection laws,” said Attorney General Bonta.
In response, Robinhood stated, “The settlement fully resolves the Attorney General’s concerns, and we are committed to making crypto more accessible and affordable for everyone.”
