Retail trading giant Robinhood is settling with the state of California for millions of dollars after an investigation uncovered users were stymied from withdrawing their funds.
In a new press release, California’s Department of Justice says that Attorney General Robert Bonta settled with the crypto branch of Robinhood for $3.9 million for failing to let customers withdraw crypto from their accounts between 2018 and 2022.
According to the state, Robinhood was in violation of the law because it allegedly sold commodities to traders without actually delivering the assets and then would not let customers withdraw their crypto to leave the platform. Instead, customers were allegedly forced to sell back their crypto in order to leave Robinhood.
Furthermore, the investigation concluded that Robinhood misled customers by claiming that its trading platform was operating through multiple marketplaces to find the best price on assets and that the platform itself would be holding customer assets.
As stated by Bonta in the press release,
“While cryptocurrency is fairly new, California has strong and enduring consumer protection laws that protect Californians against misrepresentation, including by cryptocurrency companies. Our investigation and settlement with Robinhood should send a strong message: Whether you’re a brick-and-mortar store or a cryptocurrency company, you must adhere to California’s consumer and investor protection laws.”
In addition to paying the penalty, Robinhood has also agreed to let customers withdraw their crypto assets from the platform to their own crypto wallets and to provide customers with proper disclosures and updates.
In the official settlement agreement, Robinhood did not admit or deny any violations of the law.
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