Robinhood reaches $3.9M settlement over blocked crypto withdrawals

Robinhood reaches $3.

• Robinhood Crypto has reached a $3.9 million settlement with California over claims that it stopped customers from withdrawing their crypto.
• The deal means Robinhood has to be more open and let customers take their crypto to their own wallets.

OUR TAKE
Robinhood Crypto has settled with California’s Department of Justice for $3.9 million over allegations that it stopped customers from withdrawing their crypto between 2018 and 2022. The company was accused of breaking state commodities laws by misleading customers about holding their crypto assets and offering prices that were too good to be true. While Robinhood didn’t admit to any wrongdoing, the settlement agreement includes penalties and requires the company to be more transparent about its services. In my opinion, this settlement shows how the crypto sector is becoming more and more regulated, which is why it’s important for platforms to be more open and accountable to their users.
–Heidi Luo, BTW reporter

What happened

Robinhood Crypto has agreed to pay $3.9 million to settle a case brought by California’s Department of Justice. The company is accused of blocking crypto withdrawals for users between 2018 and 2022.

The Attorney General for California, Rob Bonta, said that Robinhood broke the state’s commodities laws by stopping customers from withdrawing their crypto and misleading them about how their assets were handled.

On top of stopping withdrawals, Robinhood was also accused of lying about holding customer assets, when in fact other third-party venues were in control.

The company also advertised that it would connect to various trading venues to provide competitive prices, but this wasn’t always the case. As part of the settlement, Robinhood has to allow users to withdraw their crypto and be more transparent about asset custody and pricing practices.

Also read: Robinhood results top estimates on meme-stock, crypto-trading boom

Also read: US court orders crypto exchange FTX to repay $12.7B to customers

Why it’s important

Robinhood’s general counsel, Lucas Moskowitz, expressed satisfaction with the resolution, stating in an email to Cointelegraph: “We are pleased to have this matter behind us. He noted that the settlement addresses the attorney general’s concerns about past practices, adding that Robinhood is committed to continuing to make cryptocurrency more accessible and affordable for its users.

On 4 September, shares of Robinhood (HOOD) fell 1.34% to close at $19.11, with a slight increase of 0.16% in after-hours trading to close at $19.14, according to Google Finance.

Earlier in the day, HOOD shares rose briefly to almost $0.60 before falling slightly by the close. Despite the dip, the stock is still up around 54.5% this year, boosted by a resurgence in retail sales and the return of prominent meme stock trader Keith Gill, who hasn’t posted publicly since 2021.