News
Robinhood Says SEC Accuses Cryptocurrency Branch of Planning
Top line
Robinhood’s cryptocurrency platform may face charges from the Securities and Exchanges Commission, the trading app She said Monday, marking the latest action by federal regulators against a cryptocurrency trading platform and the latest round of SEC scrutiny for Robinhood.
The cryptocurrency arm of the trading app received a warning regarding impending action from the SEC on… [+] May 4th.
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Main aspects
Robinhood received an average of Wells Notice by SEC staff on May 4, reads a SEC filingwhich indicated that the agency had made a “preliminary determination” to bring enforcement action against Robinhood Crypto for alleged violations of federal laws regulating securities brokerages.
These notices give the company a chance to refute the allegations, according to the SECBut potential actions may include a cease-and-desist proceeding or a civil injunction, which may result in fines and censure, revocation, and limitations on future activities.
Head of legal, compliance and corporate affairs Dan Gallagher said in a declaration the company is “disappointed” the SEC issued the warning, going on to say: “We firmly believe that the assets listed on our platform are not securities and look forward to engaging with the SEC to clarify how weak any case against Robinhood is Cryptocurrencies would be based on both facts and law.”
The SEC told Forbes that it “does not comment on the existence or nonexistence of a possible investigation.”
Forbes rating
We respect the co-founders of Robinhood Baiju Bhatt AND Vlad Tenev worth $1.2 billion and $1.1 billion respectively.
Tangent
The SEC has cracked down on the largely unregulated world of cryptocurrency trading in recent years. Popular cryptocurrency trading platforms, including Binance, FTX AND CoinBase, among others, have all faced enforcement actions, including SEC lawsuits and in some cases criminal charges. At the center of many of these actions are regulators discussion that many digital currencies are securities, meaning cryptocurrency brokers must register with the SEC and follow securities laws. However, cryptocurrency platforms have widely argued that the digital assets they specialize in are not securities.
Key background
Bhatt and Tenev co-founded Robinhood in 2013, expansion the trading platform to include cryptocurrency trading in 2018. The company is known for offering zero-commission trading, making it popular among younger retail traders, but some critics say it has allowed novice users to make risky investments they don’t fully understand. the trading app interruptions encountered in March 2020, which led to a proposed class action lawsuit alleging negligence, and was also criticized for temporarily restrict trade in January 2021, during a demonstration of Gamestop shares. Robinhood settled the proposed class action lawsuit on undisclosed terms in May 2022, according to Reuters. The SEC opened a civil fraud investigation into Robinhood in September 2020, over allegations that it failed to disclose that it was selling customer orders to high-frequency trading firms. Regulators charged the exchange the following December, with the exchange agreeing to pay $65 million to settle the claims.
Surprising fact
Robinhood stock skyrocketed to its highest level, up 12%, since 2021 on March 14, after the trading platform reported an increase in retail investor activity.
Further reading
Robinhood shares rise to highest level since 2021 (Forbes)
Robinhood reportedly hit by SEC fraud probe, possible fine of more than $10 million (Forbes)