Robinhood Hit with $3.9M Fine Over Crypto Issues, Stock Drops Amid Future Plans  

• Robinhood restricted users’ ability to withdraw cryptocurrency between 2018 and 2022, leading to a $3.9M settlement.  
• The California DOJ found Robinhood falsely claimed its platform provided the best market prices for cryptocurrency transactions.  
• Robinhood must allow crypto withdrawals to external wallets and inform customers of potential trade delays due to security measures.

Robinhood is facing a $3.9 million penalty after an investigation by the California Department of Justice (DOJ) revealed problems related to its cryptocurrency withdrawal processes. The investigation found that from 2018 to 2022, the company limited users’ ability to withdraw digital assets from the platform, forcing customers to sell their crypto instead.

Problems with Cryptocurrency Withdrawal

Between 2018 and 2022, Robinhood customers reported difficulties withdrawing their cryptocurrency holdings. The DOJ’s investigation confirmed that users were restricted to selling their digital currencies and receiving the cash in their Robinhood accounts. They were not allowed to directly transfer crypto to external wallets, which frustrated many customers. This violation prompted the state’s Attorney General, Rob Bonta, to take action.

False Claims and Misleading Practices

Further investigation revealed that Robinhood misled its users by claiming that its platform was connected to other trading platforms, ensuring the best market prices. This was found to be untrue, raising concerns about the company’s transparency and business practices. Bonta emphasized that companies, including cryptocurrency firms, must adhere to consumer protection laws.

As part of the settlement, Robinhood is required to implement several changes to its operations. The company must now allow customers to withdraw their cryptocurrency to external wallets, a key issue that led to the investigation. Additionally, Robinhood must inform users that their assets are held by the company, and some delays in trade settlements could occur due to security measures.

Robinhood’s Response to the Settlement

Lucas Moskowitz, Robinhood’s General Counsel, expressed satisfaction with the resolution. He stated that the company had addressed the concerns raised by the Attorney General and planned to make cryptocurrency more accessible and affordable for users. Moskowitz also mentioned Robinhood’s commitment to improving transparency and service quality.

Following news of the settlement, Robinhood’s stock dropped by 1.34%, closing at $19.11 on Wednesday. Despite the legal setback, Robinhood remains focused on expanding its presence in the cryptocurrency market. The company recently announced plans to acquire Bitstamp, a major crypto exchange, by mid-2025. 

In the second quarter of this year, Robinhood reported strong revenue growth from cryptocurrency transactions, with $81 million in crypto-based earnings, a 161% increase compared to the same period last year.