Robinhood Agrees $3.9 Million Settlement with California Over Crypto Withdrawals

The settlement, announced by Attorney General Rob Bonta, is the first public action by the California Department of Justice (DOJ) against a cryptocurrency company.

The investigation revealed that during the period, Robinhood (Specifically Robinhood Crypto, LLC) prevented customers from withdrawing their cryptocurrency, forcing them to sell their assets back to the platform to exit trades.

The practice violated California Commodities Law, which mandates the proper handling and delivery of purchased assets.

Additionally, Robinhood is said to have misled customers by claiming it would connect to multiple trading venues for the most competitive pricing, a promise the company did not always fulfill.

The settlement includes a $3.9 million penalty and requires Robinhood to implement significant changes to its operations.

The company must now allow customers to withdraw their crypto assets to external wallets and ensure that its communication about trading practices aligns with reality.

Robinhood is also mandated to clarify the custody of customer cryptocurrencies and notify California’s DOJ of any security concerns or incidents that result in delayed settlement.

Attorney General Bonta said that consumer protection laws extend to cryptocurrency companies and warned that businesses must comply with California’s investor protection regulations.

“While cryptocurrency is fairly new, California has strong and enduring consumer protection laws that protect Californians against misrepresentation, including by cryptocurrency companies,” said Attorney General Bonta. “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.”