Robinhood Markets’ cryptocurrency platform, Robinhood Crypto, will pay $3.9 million to settle claims that it restricted customers from withdrawing their digital assets between 2018 and 2022, according to an announcement from California Attorney General Rob Bonta on Wednesday.
This settlement marks the first public legal action taken by Bonta’s office against a cryptocurrency company. Robinhood was accused of violating California’s consumer protection laws by failing to allow users to access the cryptocurrency they had purchased. As a result, many customers were unable to withdraw their assets and were forced to sell them to exit the platform.
Robinhood also faced allegations of misleading its customers regarding the custody of their crypto assets and falsely advertising that it would connect users to multiple trading venues to guarantee competitive pricing.
While Robinhood did not admit to any wrongdoing, the settlement mandates that the platform allow customers to withdraw their crypto assets to their personal wallets and accurately represent its trading and order-handling processes moving forward.
Lucas Moskowitz, general counsel at Robinhood, expressed satisfaction with the resolution in a statement, saying, “We look forward to making cryptocurrency more accessible and affordable to everyone.”
Bonta highlighted the significance of the case, stating that the settlement “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.”
The issue should be a focus on the importance of self-custody in cryptocurrency. When users rely on custodial services, they give up control over their private keys—the essential component for managing crypto assets. This dependence on third-party platforms comes with risks, including insolvency, security breaches, or limited options for managing and withdrawing assets.
Richard Wells
Financial Desk
