California Attorney General Rob Bonta said the settlement not only includes a monetary fine, but also requires Robinhood to be more transparent in the future.
An investigation by the California Department of Justice found that Robinhood provided incomplete information about trading and order processing during the period. In addition, the platform allowed users to buy cryptocurrency through contracts without delivering assets. Customers who wanted to withdraw funds were forced to sell their assets back to Robinhood because they could not transfer them to external wallets.
The investigation also found that Robinhood may have misled customers by claiming that the platform was connected to multiple trading services to ensure competitive prices, but that was not always the case. Robinhood claimed to be the custodian of all cryptocurrency purchased by customers, but there were instances where assets were stored on third-party platforms without customer disclosure, prosecutors said.
Bonta emphasized that Robinhood violated the California Consumer Goods Act (CCL) by doing so. Cryptocurrency companies are not exempt from California consumer protection laws. As new technologies evolve, not only traditional companies but also organizations working with digital assets must comply with these laws.
As part of the settlement, Robinhood agreed to several conditions aimed at protecting consumers. First, the platform must allow customers to transfer cryptocurrency to external wallets without forcing users to sell the assets back. Robinhood must also disclose information regarding order processing and pricing. The platform must also update its User Agreement to include disclaimers about potential delays in settlement with trading platforms due to network security issues, and disclose any settlement delays longer than a week.
In 2020, the U.S. Securities and Exchange Commission (SEC) accused Robinhood of hiding information from users, for which the company paid a $65 million fine. However, the platform remains under close scrutiny from the SEC. In May, the regulator threatened to sue Robinhood for possible violations of federal securities laws.
Source: Bits
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