In California, Robinhood was fined 3.9 million dollars for the ban imposed on crypto withdrawals from 2018 to 2022. For prosecutor Rob Bonta, this decision is a strong message for all companies in any sector.
Robinhood and the $3.9 million fine in California for the ban on crypto withdrawals 2018-2022
The Attorney General of California, Rob Bonta, announced that he has reached an agreement with the crypto-trading platform Robinhood.
In practice, it seems that Robinhood Crypto, LLC had prohibited its customers from withdrawing cryptocurrencies from their accounts on the platform, exactly from 2018 to 2022.
After a long investigation into the violation of the California Commodities Law (CCL) by Robinhood, the prosecutor has now announced the verdict: Robinhood has been fined $3.9 million.
Not only that, Bonta also emphasized that this sanction must become a strong message for any market actor. Here are his words:
“Even though cryptocurrencies are quite new, California has strong and long-lasting laws to protect consumers that shield Californians from false statements, even from cryptocurrency companies. Our investigation and the agreement with Robinhood should send a strong message: Whether it is a brick-and-mortar store or a cryptocurrency company, it is necessary to adhere to California’s consumer and investor protection laws. I am committed to using all the tools at my office’s disposal to protect Californian consumers in the face of advancing technology in the market.”
Robinhood will pay in California for its former ban on crypto withdrawals 2018-2022
The sanction of 3.9 million dollars for Robinhood is the result of an investigation by the California Department of Justice, which concluded that the platform had sold commodity contracts in violation of the CCL.
Not only that, from what has emerged, it seems that during that period, Robinhood would have allowed customers, who hoped that their investment would gain value in the short term, to purchase cryptocurrencies without actually delivering these assets to the customers.
During this period, customers could not withdraw their crypto and were forced to resell them to Robinhood to exit the trading platform.
In this sense, according to California law, Robinhood misled customers also by advertising that it would connect to multiple trading venues, to ensure that customers received the most competitive prices among the venues, which was not always true.
Having said that, in addition to the $3.9 million fine, under today’s agreement Robinhood will also have to allow its customers to withdraw their crypto from the platform.
The increase in earnings thanks to crypto trading
Last month, Robinhood published its financial report for the Q2 2024 period. From what has emerged, it seems that the platform’s earnings from crypto trading operations have increased by 161% compared to Q2 2023.
The famous trading app earned 81 million dollars from April to June 2024, solely from crypto operations of its clients, thanks to an increase in trading volume
Speaking of revenues, then, Robinhood’s quarter recorded a total of 682 million dollars, an increase compared to the same period of the previous year.
Of these, almost 12% came from cryptocurrency exchange operations, whose increase was greater compared to the overall average.